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JNTERNATIONAL 

BIMETALLISM 


BY 

FRANCIS  A.    V/ALKUR,    PH.D.,    LL.D. 

President  Massachusetts  Institute  of  Technology, 

Author  of  "  Political  Economy"   "  The  Wages  Question? 

"Money"    "  Money,   Trade,  and  Industry,"  etc. 


NEW  YORK 

HENRY  HOLT  AND  COMPANY 


Copyright,  1896, 

BY 
HENRY  HOLT  &  CO. 


ROBERT  DRUMMOND,  RLECTROTYFBR  AND  PRINTER,  NEW  YORK. 


PREFACE 

BY  invitation  of  the  President  and  Fellows  of  Har- 
vard University,  I  delivered  a  course  of  lectures  on 
Bimetallism  in  that  institution  during  the  academic 
term  now  drawing  to  a  close.  Of  those  lectures  this 
book  is  the  public  outcome.  The  material  thus  brought 
together  is  now  published,  the  lecture  form  being  aban- 
doned, while  the  order  of  topics  and  the  style  of  treat- 
ment are  preserved.  I  am  much  indebted  to  Prof. 
Willard  Fisher,  of  Wesleyan  University,  and  to  Pres- 
ident Andrews,  of  Brown  University,  for  their  gener- 
ous assistance.  Prof.  Fisher  has  kindly  read,  not  only 
the  manuscript,  but  the  proofs  of  this  work.  While 
he  cannot,  under  the  conditions  of  a  hurried  revision 
and  publication,  be  held  responsible  for  any  errors 
which  may  still  remain,  I  gladly  acknowledge  many 
valuable  suggestions  and  corrections  from  his  pen. 

While  I  began  to  write  on  money  for  the  newspapers 
as  early  as  1858,  my  published  works  on  the  subject 
began  with  the  issue  of  my  large  treatise  in  1878. 
The  year  following  I  delivered  a  course  of  lectures  in 
the  Lowell  Institute,  of  Boston,  which  were  brought 
out  in  book  form  under  the  title  Money,  Trade,  and 
Industry.  I  do  not  know  that  I  have  had  occasion  to 
change  a  single  one  of  the  opinions  expressed  in  those 
volumes.  The  subject  seems  to  me,  as  it  has  always 
seemed,  a  perfectly  simple  one  if  prejudice  and  passion 
are  not  allowed  to  obscure  it. 

iii 


IV  PREFA  CE. 

While  this  little  work,  as  the  account  of  its  origin 
shows,  was  prepared  without  the  slightest  reference  to 
the  impending  political  contest  in  the  United  States, 
I  shall  be  glad  if  it  proves  to  be  in  any  degree  in- 
structive with  reference  to  the  question  which  is  des- 
tined to  underlie  that  great  struggle.  Though  a  bi- 
metallist,  of  the  international  type,  to  the  very  center 
of  my  being,  I  have  ever  considered  the  efforts  made 
by  this  country,  for  itself  alone,  to  rehabilitate  silver 
as  prejudicial  equally  to  our  own  national  interests  and 
to  the  cause  of  true  international  bimetallism.  In  my 
Money,  Trade,  and  Industry,  published  after  my  return 
from  the  Paris  Conference  of  1878,  I  made  use  of  the 
following  language  :  "  For  us  to  throw  ourselves  alone 
into  the  breach,  simply  because  we  think  silver  ought 
not  to  have  been  demonetized,  and  ought  now  to  be 
restored,  would  be  a  piece  of  Quixotism  unworthy  the 
sound  practical  sense  of  our  people.  The  remedy  of 
the  wrong  must  be  sought  in  the  concerted  action  of 
the  civilized  States,  under  an  increasing  conviction  of 
the  impolicy  of  basing  the  world's  trade  on  a  single 
money  metal.  The  demonetization  of  silver  was  a 
work  of  ill  advice.  Let  its  restoration  be  a  work  of 
good  advice.  The  subject  is  not  likely  to  lose  its  hold 
on  the  public  attention  so  long  as  gold  continues  to 
rise  in  value.  Let  us  await  the  time  to  act  with  effect ; 
and  not  forfeit  our  present  remarkable  success  and 
imperil  resumption  by  measures  which  can  do  no  last- 
ing good  to  the  cause  of  silver  and  may  do  much  harm 
to  ourselves." 

BOSTON,  June  19,  1896. 


CONTENTS 


CHAPTER    I 


PACK 

THE  EARLY  PRODUCTION  OF  THE  PRECIOUS  METALS i 


CHAPTER    II 
AUGUSTUS  TO  COLUMBUS 25 

CHAPTER   III 
BIMETALLISM  IN  ENGLAND,  1666  TO  1816 53 

CHAPTER    IV 
FRENCH  AND  AMERICAN  BIMETALLISM  TO  1851 85 

CHAPTER   V 
FRENCH  BIMETALLISM  TO  1873 118 

CHAPTER   VI 
DEMONETIZATION 155 

CHAPTER   VII 
THE  GREAT  DEBATE 190 

CHAPTER   VIII 

REVIEW  AND  SUMMARY 233 

v 


BIMETALLISM 


CHAPTER   I. 

THE    EARLY    PRODUCTION  OF  THE  PRECIOUS  METALS. 

THE  word  Bimetallism  means  something  concerning 
two  metals,  in  conjunction  or  in  some  mutual  relation 
to  each  other.  In  addition  to  this,  it  has  come  to  be 
understood  that  the  two  metals  are  gold  and  silver; 
and  that  this  conjunction,  or  mutual  relation,  is  in,  or 
through,  their  use  as  money.  Beyond  this,  bimetal- 
lism may  mean  more  or  may  mean  less.  In  ordinary 
speech,  if  without  qualification  or  previous  explana- 
tion, it  means  either  the  system  of  national  bimetal- 
lism, with  free  coinage  of  both  metals  at  the  legal 
ratio,  such  as  existed  in  the  United  States  from  1792 
to  1873,  in  France  after  1785,  and  in  many  other 
countries  at  various  times;  or  else,  and  this  more 
properly,  the  system  of  international  bimetallism, — 
again  with  free  coinage  of  the  metals,  at  a  ratio  com- 
mon to  the  contracting  nations, — such  as  existed  under 


2  BIMETALLISM. 

the  Latin  Union*  between  1865  and  1873;  such  as 
has  been  proposed  to  be  constituted  between  wider 
groups  of  nations,  in  successive  international  confer- 
ences and  in  a  host  of  treatises,  tracts,  and  public 
addresses.  The  term  would,  with  due  explanation, 
embrace  the  monetary  system  which  Prof.  Alfred 
Marshall  has  proposed,  and  to  which  Prof.  Edge  worth 
has  applied  the  name  Symmetallism — contemplating 
the  union  of  both  metals,  in  fixed  proportions,  in  a 
monetary  unit,  "a  linked  bar,"  on  which  a  paper 
currency  may  be  based,  a  proposal  somewhat  similar 
to  that  made  by  Sir  James  Steuart,  about  the  middle 
of  the  last  centuryf ;  as  well  as  the  system  proposed, 
under  the  name  of  Joint  Metallism,  by  Mr.  Anson 
Stokes  Phelps,  of  New  York. 

There  is  not  much  in  the  sacred  or  the  classical 
writings  of  antiquity  which  bears  importantly  upon 
our  subject,  though  there  are  many  curious  and  inter- 
esting allusions  or  accounts  relating  to  the  precious 
metals.  The  references  to  this  matter  in  the  Plebrew 
Scriptures,  in  particular,  have  always  had  a  peculiar 
fascination  for  the  modern  man.  Few  writers  on 
money  fail  to  tell  their  readers  how  Abraham  paid  the 
children  of  Heth  four  hundred  shekels  of  silver  for  the 
cave  of  Machpelah.  At  the  time  when  the  Book  of 
Job  was  believed  to  be  among  the  oldest  works  of 

*  France,  Italy,  Belgium,  and  Switzerland  signed  the  treaty, 
December  23,  1865.  It  went  into  effect  August  i,  1866.  The 
Papal  States  joined  the  Union,  January  18,  1866  ;  Greece,  April 
10/22,  1867  ;  Roumania,  April  14,  1867.  See  pp.  121,  131,  180. 

f  Essentially  the  same  scheme  is  skilfully  presented  by  Pro- 
fessor Theodor  Hertzka,  in  his  Das  Internationale  Wahrungspro- 
blem  und  dessen  Losung,  (Wien,  1892.) 


EARL  y  PROD  UCT10N  OF  PRECIOUS  METALS.        3 

literature,  its  generalization,  "  Surely  there  is  a  vein 
for  silver;  and  the  earth  hath  dust  of  gold/'  was  re- 
garded as  most  remarkable  for  the  keenness  and 
breadth  of  observation  displayed  regarding  the  respec- 
tive modes  of  occurrence  of  the  two  metals.*  But  the 

*  By  far  the  larger  part  of  the  gold  obtained  has  come  from, 
"  placers,"  on  or  near  the  surface,  where  the  metal,  in  dust  or  in 
fine  grains,  though  sometimes  in  small  masses  or  "nuggets,"  is 
found  amid  sand,  gravel,  or  boulders.  The  fine  particles  of  gold 
are  separated  from  the  sand  by  hand-washing,  where  a  pail,  a  plate, 
or  a  shovel  answers  the  miners'  purposes  ;  or  "sluices"  may  be 
constructed,  down  which  the  water  carries  the  sand,  dropping 
the  heavy,  i.e.  the  precious,  particles  on  the  way.  More  elabo- 
rate devices  and  even  delicate  and  powerful  machines  are  some- 
times employed  in  connection  with  placer-mining.  If  the  earth, 
the  gravel,  and  the  stones  in  which  gold  occurs,  have  been  closely 
packed  into  great  solid  ridges,  the  force  of  water,  sometimes  in 
tremendous  streams,  is  employed  to  break  up  and  wash  away  the 
whole  mass  of  material,  which  is  then  treated  as  before  stated. 
This  is  called  Hydraulic  Mining,  which  is,  however,  a  form  of 
placer-mining.  In  later  times,  gold  has  been  increasingly  taken 
from  "  veins"  or  "  pockets,"  where  the  metal  is  found  mechani- 
cally held  in  place  by  rock — often  at  great  depths  below  the  sur- 
face. Here  the  rock  is  raised  from  the  mine  and  crushed  by 
powerful  machinery,  and  the  gold  extracted,  sometimes  by  me- 
chanical processes  (often  merely  by  introducing  the  action  of 
gravity),  to  separate  the  light  (worthless)  from  the  heavy  (pre- 
cious) particles  ;  sometimes  by  chemical  processes.  On  the  other 
hand,  there  is  no  proper  "placer-mining"  in  the  case  of  silver, 
that  metal  being  found  in  the  rock,  generally  in  chemical  com- 
binations, as  ores.  The  treatment  of  these  ores  is  largely  a  chem- 
ical problem.  The  agent  once  most  employed  to  separate  the 
silver  from  its  base  associations  was  quicksilver  :  to  this  process 
the  term  "  amalgamation  "  is  applied.  In  recent  times,  smelting 
with  fluxes  has  become  the  more  common  method.  Some  gold, 
however,  is  almost  always  found  associated  with  silver,  the  pro- 
portion ranging  from  one-twentieth  to  one-fifth,  or  higher,  in 
value.  On  pp.  593  et  sq.  of  the  Report  of  the  Director  of  the  Mint 


4  BIME  TA  LLISM. 

far  later  date  assigned  by  modern  criticism  to  those 
writings  makes  this  saying  much  less  notable.  In  the 
Book  of  Daniel  we  read  of  the  great  image  of  gold 
which  Nebuchadnezzar  set  up  on  the  plains  of  Dura, 
whose  height  was  threescore  cubits  and  the  breadth 
thereof  six  cubits.  How  sumptuous  is  the  description 
of  the  great  Temple!  "  So  Solomon  overlaid  the 
house  within  with  pure  gold :  and  he  made  a  partition 
by  the  chains  of  gold  before  the  oracle ;  and  he  over- 
laid it  with  gold.  And  the  whole  house  he  overlaid 
with  gold,  until  he  had  finished  all  the  house:  also 
the  whole  altar  that  was  by  the  oracle  he  overlaid  with 
gold."  There  is  even  a  prophecy  of  Mr.  Godkin  and 
the  Evening  Post,  in  the  remark  which  follows  the  de- 
scription of  the  drinking-vessels  of  the  house  of  the 
forest  of  Lebanon:  ':<  None  were  of  silver:  it  was 
nothing  accounted  of  in  the  days  of  Solomon."  Well 
might  Bacon  say,  "  Prosperity  was  the  blessing  of  the 
Old  Testament,"  as  he  read  the  story  of  Solomon's 
splendor,  of  the  fleets  arriving  from  Tarshish  and  from 
Ophir;  of  the  spices  and  the  sweet-smelling  woods 
and  the  precious  stones,  the  ivory  and  the  peacocks 
and  the  apes;  of  the  two  hundred  targets  of  beaten 
gold,  six  hundred  shekels  to  each  target;  the  three 
hundred  shields  of  beaten  gold,  three  pounds  to  each 
shield.  Still,  all  this  helps  us  little  towards  under- 
standing the  nature  and  uses  of  money;  much  less, 
towards  comprehending  the  relations  between  gold  and 
silver  in  the  performance  of  that  function.  Until  we 

on  the  Production  of  Gold  and  Silver  in  the  United  States,  for 
1884,  is  given  an  account  of  the  big  nuggets  of  gold.  They  run 
to  a  maximum  of  2340  oz.,  worth  $43,534. 


EARL  Y  PROD  UCTION  OF  PRECIOUS  METALS.         5 

know  more  about  the  cave  of  Machpelah,  the  length 
and  the  height  and  the  breadth  thereof,  than  history 
and  tradition  have  handed  down,  the  statement  that 
Abraham  paid  four  hundred  shekels  for  it  throws  but 
a  faint  light  on  the  purchasing  power  of  money  in  this 
time;  while  the  proud  boast  that  King  Solomon 
"  made  silver  to  be  in  Jerusalem  as  stones,"  though 
enough  to  turn  Senators  Jones  and  Stewart  into  rank 
infidels,  does  not  suggest  a  ratio. 

The  classical  writers  are  even  less  satisfactory  in  their 
allusions  and  descriptions  relating  to  times  before  the 
Macedonian  Conquest.  Fable  is  at  its  worst  here. 
Ignorance  and  an  inflamed  imagination  unite  to  en- 
gender the  most  remarkable  prodigies  whenever  the 
precious  metals  become  the  theme  of  the  early  writers. 
The  stories  of  the  treasures  of  Ninus  and  of  Crcesus, 
the  description  of  the  temple  of  Belus,  with  its  three 
giant  statues  of  pure  gold,  and  its  altars,  censers,  and 
drinking-vessels  of  beaten  gold,  the  circumstantial 
accounts  of  the  vast  revenues  of  the  later  Persian 
kings — all  these,  while  they  serve  to  exhibit  the 
strength  of  that  passion  which  from  the  earliest  ages 
has  possessed  men  at  the  sight  or  at  the  very  thought 
of  gold  and  silver  and  excite  our  wonder  that  in  such 
a  state  of  chemical  and  mechanical  knowledge  and  skill 
treasures  should  have  been  accumulated  which  could 
even  be  misrepresented  thus,  yield  but  a  slender  foun- 
dation on  which  to  construct  an  estimate  of  the  world's 
stock  of  the  precious  metals,  or  of  the  sources  from 
which  these  were  chiefly  drawn.  But  the  conquest  of 
Persia  by  Alexander,  laying  open  the  treasure-houses 
of  Susa,  Persepolis,  and  Ecbatana,  afforded  something 


O  SI  ME  TA  LLISM. 

like  a  measure  of  the  metallic  wealth  which  had  been 
heaped  up  by  the  toil  and  blood  of  millions  of  human 
beings,  through  many  centuries,  to  form  the  glory  of 
temple  and  palace,  and  to  become  the  treasure  of 
priest  and  king.  Whether  we  discount  by  more  or  by 
less  the  accounts  of  Alexander's  spoil,  whether  we 
believe  the  seven  hundred  and  forty  thousand  talents 
of  Ptolemy  Philadelphus  to  have  been  Roman  talents 
or  the  smaller  Ptolemaic  talents,  we  cannot  avoid  the 
conviction  that  the  stock  in  that  early  time  amounted 
to  hundreds  of  millions  of  our  money.  This  is  the 
all-important  fact  in  the  early  history  of  the  precious 
metals.  Whether  the  actual  amount  was  larger  or 
smaller  would  be  only  of  curious  interest.  The  marvel, 
the  miracle,  was  that  it  should  have  reached  into  the 
hundreds  of  millions  at  all.  How  was  it  possible  that 
such  a  result  should  be  attained  ?  How  could  it  have 
been  desired  to  put  so  large  an  amount  of  labor  into 
this  form  of  wealth,  at  a  time  when  the  conditions  of 
human  existence,  generally,  remained  so  strait  and 
painful;  at  a  time  when  urgent  wants  had  been  so 
scantily  supplied;  when  so  much  needed  to  be  done 
to  make  the  life  of  men  and  communities  merely  en- 
durable ?  When  absolute  necessaries  were  lacking, 
why  should  so  much  have  been  given  to  the  highest 
form  of  luxury?  When  bread  was  scarce,  to  the  point 
of  frequent  famine,  why  should  men  have  dug  for 
gold?  When  the  fertile  surface  of  the  earth  called 
aloud  for  cultivation,  offering  every  variety  of  grain 
and  fruit  and  fibre,  why  should  hideous  and  sterile 
places  have  been  searched  for  that  which  could  give 
neither  warmth  nor  shelter  nor  nourishment? 


EA RL  Y  PROD  UCTION  OF  PRECIO  US  ME  TA  LS.         "J 

Again,  conceding  the  utmost  influence  of  the  pas- 
sion for  gold,  inciting  continuously  and  unrelentingly 
to  its  production,  at  whatever  sacrifice  of  other  objects, 
even  objects  of  primary  necessity,  how  could  such 
mighty  masses  have  been  brought  into  the  hands  of 
men  in  an  age  when  the  simplest  mechanic  arts  were 
scarcely,  known,  when  the  accumulations  of  useful 
capital  were  insignificant,  before  machinery  had  been 
invented  or  the  power  of  steam  brought  to  reinforce 
human  labor  ?  How  was  such  a  result,  under  such 
conditions,  physically  possible  ?  Thirdly,  how  was 
such  a  production  of  the  precious  metals  economically 
possible,  under  the  law  which  controls  the  value  of 
money  ?  It  will  not  be  necessary  to  take  much  time  to 
answer  the  first  two  questions.  They  are  mainly  of 
historic,  rather  than  economic,  interest.  Perhaps  we 
can  best  convey  a  brief  answer  by  pointing  out  a  highly 
analogous  case  in  the  history  of  the  same  age.  The 
Pyramids — why  should,  how  could,  they  have  been 
built  with  the  arts  and  under  the  conditions  then 
existing  ?  If  we  answer  these  two  questions,  we  shall 
have  all  that  is  needed  for  an  answer  to  the  first  two 
questions  regarding  the  early  accumulation  of  gold. 
Can  we  conceive  the  greatest  of  modern  nations, 
England,  the  United  States,  Germany,  or  Russia, 
though  possessing  many  hundred  times  the  construc- 
tive power  of  ancient  Egypt,  erecting  the  smallest  of 
the  famous  pyramids  ?  We  cannot  imagine  it.  The 
motive  which  could  prompt  to  and  sustain  the  under- 
taking would  be  so  utterly  lacking,  in  the  presence  of 
other  urgent  and  imperious  wants  and  demands,  indi- 
vidual or  social,  that  we  may  fairly  say,  such  a  work 


8  BIMETALLISM. 

would  be  impossible  to-day.  The  ancient  rulers  who 
built  those  gigantic  monuments  had  but  to  wish  and 
to  will,  from  whatever  perverse  or  grotesque  fancy; 
and  the  walls  must  rise  and  rise,  course  after  course, 
though  every  stone  cost  a  human  life.  Generation 
after  generation  must  toil,  to  fainting  and  to  death, 
that  the  mighty  mass  might  lift  itself  ever  higher  and 
higher.  The  task  was  completely  non-economic :  that 
is,  it  had  no  reference  to  a  producer  or  a  consumer, 
except  only  that  the  miserable  victims  of  despotic 
power  must  needs  be  fed.  somewhat,  that  they  might 
keep  up  their  hopeless  labor;  and  children  must 
needs  be  reared,  to  take  their  unenviable  place. 
Even  this  last  was  not  always  a  condition,  since  war 
and  conquest  supplied  hosts  of  slaves  bred  and  grown 
to  the  size  and  strength  to  work  in  the  quarries,  on 
the  barges,  along  the  causeways  up  which  the  mon- 
strous stones  were  hauled,  or  on  the  walls. 

Precisely  similar  were  the  terms  on  which  hosts  of 
men  labored,  through  many  centuries,  to  pile  up  the 
treasures  of  Susa,  Persepolis,  and  Ecbatana;  and  to 
provide  the  gold  and  the  silver  for  the  temples  at 
Jerusalem,  at  Babylon,  at  Delphi,  the  palaces  of  Solo- 
mon, of  Croesus,  of  Pytheus,  of  Darius,  the  Capitol, 
at  Rome.  To  these  wretched  beings  hunting  for  gold 
in  the  sands  of  the  rivers,  mining  for  gold  among  the 
barren  mountains,  was  not  vocation,  but  destiny. 
They  were  born  to  it,  reared  to  it,  and  in  it  they 
expended  their  miserable  lives,  without  hope  or 
thought  of  a  reward.  They  were  not  hired,  but  driven 
to  their  work.  They  were  not  drawn  by  superior 
attractions  from  other  fields  of  labor;  they  were 


EARL  Y  PROD  UCTION  OF  PRECIOUS  METALS.         9 

marched  in  gangs,  perhaps  in  chains,  from  a  short 
night's  rest  to  a  long  day  of  toil.  It  would  be  mockery 
to  apply  the  term,  industry,  to  the  gold-mining  of  the 
early  ages.  There  were,  indeed,  those,  here  and 
there,  who  stealthily  and  at  great  risk  hunted  for  the 
precious  metals  in  the  hope  of  gain ;  but  of  the  vast 
bulk  of  the  treasures  heaped  up  by  the  rulers  of  the 
Old  World,  we  may,  without  exaggeration,  though  in  a 
somewhat  violent  figure,  say  it  was  transmuted  blood. 
Thus  do  I  answer  the  first  two  questions  asked, 
regarding  the  production  of  the  precious  metals  in  the 
early  ages.  The  answer  to  the  third  will  require  more 
time:  How  was  such  a  production  of  the  precious 
metals  economically  possible,  under  the  law  which 
controls  the  value  of  money  ?  That  law  is  in  effect 
this:  The  more  freely  and  largely  gold,  say,  in  any 
given  interval  of  time,  is  produced,  and  the  longer 
that  production  is  carried  on,  the  less,  other  things 
equal,  becomes  the  motive  to  continued  production 
on  the  same  scale.  The  new  metal  going,  it  is 
assumed,  into  circulation,  becoming  in  some  large 
degree  money,  raises  prices.  This  fact  increases  the 
money-cost  of  producing  further  amounts  of  gold;  and 
thus,  in  a  figure,  drowns  out  the  mines,  or  all  but  the 
best  mines.  The  effect  is  to  be  compared  with  a  fall 
of  water,  which  produces  mechanical  power,  but  which, 
in  the  case  of  an  insufficient  outlet  below,  gradually 
fills  up  its  basin,  every  rise  in  the  level  of  this  diminish- 
ing the  force  engendered,  until  at  last  the  waterfall 
disappears  and  we  have  simply  a  lake,  with  a  great  and 
useless  well  in  one  part  of  it.  An  abrupt  descent  in 
the  bed  of  the  Atlantic,  to  the  extent  of  several  thou- 


10  BIMETALLISM. 

sand  feet,  creates  no  mechanical  power.  A  fall  of  a 
hundred  and  fifty  feet  in  the  Niagara  River  is  capable 
of  yielding  millions  of  "  horse-power,"  simply  because 
the  water  falling  is  carried  away  below. 

With  the  small  demand  for  the  precious  metals 
for  the  purposes  of  commerce  which  could  possibly 
have  arisen  from  the  petty  production  of  goods  in 
those  early  days,  reenforced  by  the  small  demand  for 
them  for  the  purposes  of  ornament  and  decoration 
which  could  possibly  have  been  made  effective  under 
a  democratic  organization  of  society,  or  granting 
merely  personal  freedom,  the  production  of  the  pre- 
cious metals  could  never  have  risen  to  such  a  height. 
If  it  had  tended  to  do  so,  under  any  impulse,  it  would, 
so  to  speak,  have  drowned  itself  out,  by  its  necessary 
effect  in  raising  prices.  This  is  the  economic  con- 
dition under  which  the  production  of  the  precious 
metals  is  carried  on,  under  the  operation  of  the  law 
of  supply  and  demand.  But  in  the  ages  of  which 
we  are  speaking,  especially  throughout  the  Eastern 
world,  that  production  was  chiefly  non-economic,  in  a 
sense  even  additional  to  that  which  we  have  already 
expressed.  Not  only  did  the  proprietor  of  the  mines 
not  have  to  make  it  worth  while  for  the  laborers  in  the 
mines  to  work  for  him;  but  the  uses  to  which  the 
resulting  metal  was  predominantly  put  were  such  as  to 
prevent  its  passing  into  circulation  and  thus  raising  the 
money-cost  of  further  production.  On  the  one  hand, 
the  mines,  by  unchallenged  prerogative  the  property 
of  the  prince,  were  worked  by  his  subjects,  who  were 
equally  his  property,  for  his  pleasure  only;  and  on 
the  Other  hand,  the  products  remained  his  peculiar 


EARL  Y  PRODUCTION  OF  PRECIOUS  METALS.       I  I 

possession,  or,  under  the  influence  of  superstittion, 
were  devoted  to  sacerdotal  uses.  Gold  and  silver  were 
regarded  as  an  end,  not  as  a  means:  they  became 
treasure,  not  money.  If  they  were  ever  distributed, 
it  was  not  by  trade,  but  by  war.  It  was  the  hand  of 
the  conqueror  that  stripped  them  from  palaces  and 
temples.  If  they  were  taken  from  the  storehouses  of 
monarchs,  it  was  not  to  freight  the  caravans  of  com- 
merce, but  to  fill  the  chariots  and  mule-carts  and  to 
lade  the  sumpter-horses  or  the  camel-trains  of  a  vic- 
torious army. 

Hence  it  was  that  the  geographical  distribution  of 
the  precious  metals  was  effected  so  tardily,  if  at  all. 
The  wealth  or  poverty  of  a  kingdom,  as  measured  by 
its  possession  of  gold  and  silver,  was  determined, 
primarily,  by  the  fact  of  mines  being  found,  or  not 
being  found,  within  its  limits;  secondarily,  by  the 
military  prowess  of  the  people  and  the  ambition  of 
their  princes.*  Persia  became  rich,  in  this  respect, 
beyond  all  precedent,  because  her  rulers  conquered  so 
many  countries  which  had  mines  of  the  precious  meals. 
It  was  with  treasures  torn  by  Cambyses  from  the  tem- 
ples of  Egypt  that  the  palaces  of  Susa  and  Persepolis 
were  built.  It  is  related  that  Philip  of  Macedon,  in 
the  early  part  of  his  reign,  before  the  mines  of  Thrace 
were  opened  to  him,  was  wont  to  place  under  his  pil- 

*  Mr.  Jacob  remarks  that  the  northern  nations  of  Europe  appear 
to  have  possessed  more  gold  and  silver  during  the  Middle  Ages 
then  was  to  be  found  in  Germany,  France,  or  the  British  Islands. 
There  is  reason  to  believe  that  this  abundance  was  due  to  the 
success  of  the  piratical  expeditions  which  scourged  the  shores  of 
so  many  countries,  perhaps,  also,  in  a  measure,  to  a  profitable 
trade  with  Russia, 


1 2  BIME  TA  LLISM. 

low  the  small  and  only  cup  of  gold  which  he  possessed. 
That  Philip's  son  loaded  with  the  golden  spoil  of 
Persepolis  ten  thousand  mule-carts  and  five  thousand 
camels.  Speaking  broadly,  we  may  say  that  the  law 
of  supply  and  demand  had  little  to  do  with  the  pro- 
duction of  the  precious  metals;  and  that  these,  when 
produced,  were  not  distributed  through  the  agency  of 
price.  To  this  rule  there  were,  of  course,  exceptions. 
The  peasantry  of  many  districts,  by  secret  labor,  ex- 
tracted small  amounts  of  gold  from  sources,  especially 
the  river-sands,  which  had  not  aroused  the  attention 
of  their  rulers.  No  degree  of  vigilance  could  guard 
against  the  unfaithfulness  of  slaves  and  overseers,  who 
pilfered  even  at  the  risk  of  life.  And  when  the 
accumulations  of  treasure  fell  into  the  hands  of  the 
conqueror,  enormous  waste  was  the  certain  accom- 
paniment of  the  transfer;  large  sums  were  seized  by 
the  soldiery  in  the  hour  of  sack  and  pillage ;  while  the 
successful  general  from  time  to  time  appeased  his 
mutinous  followers  by  donatives  of  gold  which  were 
speedily  dissipated  and  passed  into  circulation.  The 
chief  exception,  however,  to  the  non-economic  charac- 
ter of  the  production  of  the  precious  metals  was  found 
in  the  trade  of  the  Tyrians,  and  afterwards  the  Cartha- 
ginians, who  early  directed  their  great  commercial 
talents  to  exchanging  the  silver  of  Western  Europe, 
especially  of  Spain,  for  the  gold  of  Arabia  and  the 
further  East,  perhaps  of  India  itself.  Nor  could  the 
statements  previously  made  be  applied  without  large 
and  increasing  exceptions  after  the  beginning  of  the 
fourth  century  before  Christ.  Even  in  Persia,  itself, 
the  extensive  coinage  before  the  invasion  of  Alex- 


EARL  Y  PROD  UCTION  OF  PRECIO  US  ME  TALS.      1 3 

ander  showed  that  gold  had  already  begun  to  lose  its 
character  as  treasure  and  to  take  on  that  of  money. 

The  Macedonian  Conquest  changed,  to  a  great 
extent,  the  conditions  under  which  the  production  of 
the  precious  metals  had  been  carried  on.  The  reck- 
lessness of  Alexander  and  the  necessity  of  furnishing 
vast  donatives  to  a  daring,  defiant  soldiery,  combined 
to  give  a  merry  circulation  to  the  marvellous  spoil  of 
Persia.  The  influence  upon  prices  of  this  wide  and 
often  wanton  distribution  of  the  gold  which  had  been 
locked  up  in  the  treasure-houses  of  kings,  could  not  fail 
to  be  very  great.  Yet  the  operation  of  economic  law 
upon  the  production  of  the  precious  metals  was  still  im- 
perfect and  incomplete.  Profuse  and  profligate  as 
Alexander  might  be,  it  was  impossible  for  one  man,  in 
so  short  a  life,  to  dissipate  treasures  so  vast;  and  his 
successors  fell  largely  under  the  influence  of  oriental 
ideas  and  became  true  Persian  despots  and  instinctive 
hoarders  of  gold.  It  was  the  progress  of  Roman 
armies  which  finally  and  completely  released  the  un- 
counted treasures  of  centuries.  It  was  impossible  for 
Roman  statesmen,  had  they  so  planned,  to  deal  in  the 
Oriental  spirit  with  the  immense  body  of  gold  brought 
into  the  treasury  by  the  victories  of  the  Scipios, 
Paulus  Emilius,  Pompey,  and  Octavius.  The  demo- 
cratic impulse  which  prevailed  at  Rome  under  the  Re- 
public, and  which  rose  to  its  greatest  height  under  the 
most  profligate  and  arbitrary  of  Emperors,  forbade  any- 
thing like  a  Persian  treatment  of  the  precious  metals. 
Bribes  to  senators,  donatives  to  the  soldiery,  gladia- 
torial shows  and  public  distributions  of  grain  and  bread 
for  the  multitude,  ere  long  put  into  circulation  the 


14  BIMETALLISM. 

long-accumulated  treasures  of  the  East.  From  this 
cause  came  results  of  the  most  far-reaching  conse- 
quences. For  thousands  of  years  the  production  of 
the  precious  metals  had  been  conducted,  on  a  vast 
scale,  under  non-economic  motives  and  principles. 
Suddenly,  violently,  by  conquest  and  force  of  arms, 
the  whole  mass  came  under  the  control  of  economic 
law.  The  result  could  not  have  fallen  short  of  a  revo- 
lution. The  immediate  effect  upon  prices,  and,  by 
consequence,  upon  industry  and  trade,  could  not  fail 
to  be  enormous.  But  more,  and  that  all  for  evil, 
remained  to  follow. 

Let  us  pause  to  consider  certain  liabilities  to  injury, 
to  loss  and  even  to  irreparable  destruction,  to  which 
the  mining  industry  is,  by  its  very  nature,  subject. 
While  greed,  the  haste  to  be  rich,  is  always  and  every- 
where the  enemy  of  true  self-interest,  it  nowhere 
obtains  such  a  mastery  over  the  senses  of  men  as 
where  gold  and  silver  are  in  sight,  the  immediate 
objects  of  exertion.  Never  do  men  so  wantonly  sacri- 
fice the  future  to  the  present,  never  so  completely 
disregard  the  larger  considerations  of  prudence.  This 
is  not  due  merely  to  the  fact  that  the  production  of 
the  precious  metals  has  generally  been  pursued  at  a 
distance  from  the  permanent  seats  of  population, 
under  conditions  difficult  and  perhaps  dangerous,  and 
hence  by  men  more  than  usually  reckless  and  subject 
to  the  force  of  immediate  desire.  Largely  is  it 
attributable  to  the  mysterious  attraction  which  these 
metals  have  exerted  upon  the  powers  and  passions  of 
men  of  all  races  and  in  all  ages. 

But  while  greed  is  often  opposed  to  true  self-in- 


EA RL  Y  PROD  UCTION  OF  PRECIO  US  ME  TALS.       15 

terest;  and  while  it  is  easily  exalted  to  frenzy  in  the 
prospect  of  the  precious  metals,  there  is,  also,  no 
industry  in  which  so  wide  a  difference  is  made,  in  the 
large,  the  ultimate,  result,  according  as  men  work 
under  the  blind  impulse  of  immediate  acquisition,  or 
under  the  direction  of  an  intelligent  sense  of  self-inter- 
est, extending  its  view  beyond  the  present  to  a  distant 
future.  Time  will  not  serve  us  to  go  deeply  into  the 
technicalities  of  the  production  of  gold  and  silver: 
one  or  two  illustrations  will  suffice.  Here  is,  let  us 
suppose,  a  superficial  deposit  of  gold  dust  in  the  bed 
of  an  old  river.  Throughout  certain  portions  of  the 
former  channel,  where  the  forces  of  the  current 
especially  directed  it,  the  gold  lies  richly  mingled  with 
the  sand.  Over  other  portions,  it  is  found  more  and 
more  sparsely,*  yielding  a  less  and  less  return  to  labor. 
Is  it  not  evident  that  a  hundred  men,  under  intelligent 
direction,  animated  by  the  purpose  to  secure  for 
themselves,  as  a  body,  the  largest  amount  of  the 
precious  metals  from  this  deposit,  would  proceed  very 
differently  from  a  hundred  miners  who  should  rush 
into  the  bed  of  the  old  stream,  each  struggling  with 
furious  haste  to  get  the  most  he  could  before  night, 
careless  how  much  he  wasted  in  his  search,  half-wash- 
ing the  sands,  and  letting  more  than  he  obtained  be 
carried  down,  to  lodge  in  places  which  would  escape 

*M.  Chevalier  states  that  in  the  Ural  Mountains  they  work 
with  success  sands  which  contain  only  i  part  of  gold  in  400,000 
or  500,000.  In  the  Valley  of  the  Rhine,  "the  most  favored  spots, 
those  which  the  gold-washers  hunt  for,  and  on  which  they  con- 
centrate all  their  efforts,  contain  only  I  kilogramme  in  700,000." 
In  the  placers  of  California  and  Australia,  gold  was  found  in  a 
much  higher  degree. 


1 0  BIME  TA  LLISM. 

the  eye,  or  in  quantities  which  would  not  pay  the 
working? 

Let  us  now  transfer  our  view  to  the  production  of 
the  precious  metals  no  longer  from  the  bed  of  streams, 
but  from  the  deep  recesses  of  the  earth,  where  shafts 
have  to  be  driven  hundreds  of  fathoms  through  solid 
rock;  where  the  roof  under  which  the  miners  work  by 
the  light  of  their  torches  has  to  be  supported  by 
beams  of  timber  or  by  pillars  of  stone  left  in  the  prog- 
ress of  the  excavation ;  where  life  has  to  be  guarded 
most  carefully  and  expensively  against  mephitic  or 
explosive  gases ;  and  where  the  mines  have  to  be  kept 
free  of  water  by  constant  pumping  or  systematic  drain- 
age. Under  such  circumstances  there  is  a  peculiar 
necessity  that  the  present  be  strictly  subordinated  to 
the  future;  that  the  greed  for  immediate  acquisition 
be  held  strongly  in  hand  by  prudence ;  that  all  work 
be  done  in  the  large  view  of  true  self-interest.  If  only 
indolence  furnishes  in  insufficient  quantity,  or  of  inade- 
quate material,  the  timbers  which  are  to  shore  up  the 
sides  and  the  roof  of  the  galleries,  or  if,  in  the  haste 
to  push  the  work  that  yields  so  richly  its  golden  gains, 
the  accumulation  of  fire-damp  is  unnoticed  or  neg- 
lected, one  awful  hour  may  close  the  mine  forever. 

So  much  for  the  effects  of  greed  upon  the  work; 
how  of  the  worker  ?  The  statistics  of  mining  popula- 
tions show  a  horrible  waste  of  life,  arising  from  reck- 
lessness in  exposure  and  from  parsimony  in  expendi- 
ture, even  where  laborers  are  free  to  make  terms  with 
their  employers.  If  so,  how  rapid  must  have  been  the 
consumption  of  life  and  laboring  force,  when  mines 
were  generally  worked  by  convicts  and  slaves,  driven 


EARL  Y  PROD  UCT1ON  OF  PRECIO  US  ME  TA  LS.      1 7 

to  work,  by  gangs,  in  chains!  We  have  yet  another 
step  to  take  in  the  same  direction.  Let  us  suppose 
the  mines  to  be  worked,  not  by  the  owner  and  mas- 
ter who  could  never  entirely  forget  the  claims  of  the 
future,  never  be  wholly  inconsiderate  of  his  own  prop- 
erty, but  by  the  farmer,  cut  off,  by  the  very  terms 
of  his  lease,  from  all  interest  in  the  distant  future; 
intent  only  on  achieving  the  maximum  of  imme- 
diate production  with  the  minimum  of  outlay;  indiffer- 
ent as  to  the  condition  in  which  he  shall  leave  the 
mine  at  the  expiry  of  his  legal  interest  therein,  and  as 
to  the  labor-supply  of  the  next  lessee.  Here,  at  last, 
we  reach  the  explanation  of  the  havoc  which  has  been 
wrought  upon  the  mining  resources  of  the  world,  a 
havoc  which  is  eloquently  witnessed,  throughout 
Europe,  Asia,  and  Africa,  by  abandoned  mines  never 
truly  worked  out,  and  by  the  utter  sterility  of  regions 
once  the  sources  of  rich  supplies  of  metallic  wealth. 

Nor  can  we  afford  to  disregard  the  effects  of  war  and 
civil  commotion  upon  the  production  of  the  precious 
metals.  The  fire  runs  over  the  fields  and  burns  and 
blackens  all  around ;  but,  another  year,  nature  blooms 
with  even  a  greener  foliage  and  a  larger  fruitage, 
since  what  wasted  also  fertilized.  The  fire  that 
sweeps  over  the  mouth  of  the  mine  leaves  blackness 
and  the  horror  of  a  deep  silence,  only.  Such,  in  a 
figure,  is  the  difference  between  the  effects  of  war  or 
civil  convulsion  upon  mining,  and  upon  agricultural 
industry.  No  cause  has  been  more  potent  for  closing 
mines  not  yet  exhausted.  Even  religious  persecution 
has  set  its  seal  over  the  mouth  of  many  a  mine,  a  seal 
never  to  be  broken.  The  mining  population  scattered, 


1 8  B1ME  TA  LL1SM. 

the  mouth  of  the  mine  fallen  in,  the  roof  here  crush- 
ing the  neglected  timbers,  the  subterranean  springs 
there  filling  up  the  vacant  galleries,  this  once  fertile 
source  of  supply  is  added  to  the  almost  countless 
number  of  those  which  have  ceased  to  contribute  to 
the  world's  supply. 

Such  are  the  evil  liabilities  which  especially  attach 
to  the  mining  of  the  precious  metals.  Let  us  now 
inquire  how  far  Rome  was  qualified,  whether  by 
the  instincts  of  her  people  or  by  the  characteristics 
of  her  administrative  system,  to  take  up  the  work  of 
maintaining  the  world's  stock  of  gold  and  silver,  which 
devolved  upon  her  by  the  conquest  of  nearly  all  the 
great  fields  of  production.  Through  the  unstaying 
progress  of  its  arms,  not  only  had  Rome,  by  the 
second  century  after  Christ,  acquired  possession  of 
nearly  all  the  mines  throughout  the  world  then  yield- 
ing the  precious  metals ;  but  a  large  proportion  of  the 
whole  mass  of  gold  and  silver  which  had  been  produced 
during  preceding  centuries  was  drawn  to  Italy.  Mr. 
Jacob  estimates  the  stock  of  money  in  the  Empire  on 
the  accession  of  Augustus  at  ^358,000,000  sterling. 
But  while  Rome  seized  the  accumulated  treasures  of 
Carthage,  Spain,  Gaul,  Greece,  Asia,  and  Egypt, 
throwing  into  circulation,  as  money,  among  her  people, 
what  had  been  hoarded  as  royal  treasure  or  devoted 
in  vast  masses  to  sacerdotal  uses,  thus  raising  the 
prices  of  all  commodities  throughout  the  Empire,  and 
especially  in  Italy  and  the  countries  nearest  the  capi- 
tal, Roman  dominion  proved  fatal  to  the  continued 
supply  of  the  precious  metals.  The  Romans  were 
unskilled  in  mining.  Italy  was,  perhaps,  of  all  the 


EA RL  Y  PROD  UCTION  Of  PRECIO  US  ME  TALS.      1 9 

countries  embraced  within  the  Empire,  that  which  had 
least  developed  its  own  mineral  resources.  This  fact 
undoubtedly  concurred  with  the  Roman  instinct  for 
the  simplification  of  administration,  to  induce  the 
general  adoption  of  the  system  of  "  farming"  the 
mines,  with  the  result,  both  upon  the  mines  as  prop- 
erties, and  upon  the  laboring  populations  pertaining 
to  them,  which  has  been  described  as  incident  to  that 
mode  of  working. 

"  The  farmers,"  says  Mr.  Jacob,  "  took  out  only  the  best  ores, 
and  neglected  those  of  inferior  quality  ;  leaving  them  in  the 
pits,  where  they  soon  became  buried  in  the  rubbish  with  which 
they  were  surrounded.  Their  object  being  to  enrich  them- 
selves during  the  term  for  which  they  held  the  mines,  they 
naturally  neglected  the  interests  of  future  workers  and  suffered 
them  to  go  to  ruin.  Whilst  exhausting  the  mines  of  the  rich- 
est ores,  they  only  cut  the  passages  and  propped  the  roofs  in 
so  slight  a  manner  that,  if  they  lasted  during  the  current 
leases,  they  would  all  require  to  be  reconstructed  in  a  short 
period  after;  which,  when  the  best  ores  had  been  extracted, 
would  be  at  an  expense  that  could  not  be  replaced  by  any  pro- 
duct of  the  inferior  ores  which  had  been  left  behind.  The  va- 
rious contrivances  for  keeping  out  the  water  from  the  mines, 
and  the  machines  and  the  implements  for  extracting  what 
could  not  be  kept  out,  were  all  contrived  to  answer  temporary 
purposes  commensurate  with  the  length  of  the  period  for 
which  they  were  let  to  farm." 

In  still  another  way  Roman  dominion  served  to 
diminish  the  productiveness  of  the  mines,  which,  in 
Spain,  Thrace,  Asia,  and  other  gold-  or  silver-bearing 
countries,  had  been  worked,  for  the  benefit  of  the 
local  sovereigns,  by  convicts,  by  conscripts,  or  by 
serfs.  The  crop  of  convicts  in  those  brutal  days  was 
never  likely  to  fail;  and,  as  their  labor  was  essentially 


20  BIME  TALLISM. 

non-economic,  i.e.,  as  they  had,  in  any  case,  to  be 
confined  at  the  public  charge,  the  produce  of  their 
labor  bore  no  necessary  relation  to  the  cost  of  their 
maintenance.  It  was  otherwise  with  the  conscripted 
and  the  adscripted  laborers  in  the  mines,  those  drawn 
by  lot  and  those  born  to  the  service.  If  the  supply 
of  these  was  to  be  kept  up  from  generation  to  genera- 
tion, the  produce  of  their  labor  must  be  charged  with 
the  cost  of  maintaining  them,  together  with  their 
families.  A  fourth  class  consisted  of  slaves,  the  cap- 
tives of  almost  incessant  wars.  The  employment  of 
these,  again,  was  chiefly  non-economic,  being  without 
reference  to  repaying  the  cost  of  bringing  the  present 
body  of  laborers  to  maturity.  It  was  by  this  last 
means  that  the  labor-supply  of  the  mines  of  the  earlier 
period  was  largely  recruited.  The  gradual  extension 
of  Roman  dominion  brought  about  a  state  of  almost 
universal  peace,  merging  a  thousand  warring  tribes  in 
one  vast  empire :  a  state  of  peace  interrupted  only  by 
civil  commotion,  the  results  of  which,  however  bloody, 
did  not  include  the  reduction  of  the  soldiers  of  either 
faction  to  the  condition  of  slavery.  Thus  war,  as  a 
source  of  labor-supply  for  the  mines,  practically  ceased. 
Slaves  were  still,  it  is  true,  brought  into  the  Empire 
as  the  result  of  piracy,  or  of  trade  with  barbarous 
regions  beyond  the  reach  of  Roman  power;  but  these 
were  hardly  numerous  enough  to  meet  the  demands 
for  personal  service,  under  the  growing  luxuriousness 
of  the  age;  and  purchased  slaves  soon  became  too 
costly  to  be  employed  in  the  difficult  and  dangerous 
work  of  mining. 

There  remained,  as  a  resource  for  working  the  mines 


EARL  Y  PROD  UCTION  OF  PRECIO  US  ME  TA  LS.      21 

of  the  precious  metals  which  had  been  acquired  by 
conquest,  the  labor  of  convicts  and  of  serfs.  As  the 
difficulty  of  securing  laborers  from  other  sources 
ceased,  labor  in  the  mines  was  more  and  more  made 
the  penalty  of  crime,  until  this  mode  of  punishment 
became  almost  universal ;  while  successive  decrees  in- 
creased the  traditional  obligations  of  the  peasantry  in 
the  neighborhood  of  mines.  The  severity  of  these 
exactions,  coupled  with  the  cruelty  of  the  farmers  and 
overseers,  made  great  inroads  upon  the  unfortunate 
populations.  Soon  a  new  danger  presented  itself. 
The  barbarians  appeared  on  the  borders  of  the  Em- 
pire, offering  a  refuge  to  those  who  had  the  courage, 
born  of  despair,  to  attempt  their  escape  from  the 
power  of  Rome.  Next,  the  barbarians  thrust  them- 
selves into  the  Empire ;  and  the  lands  earliest  invaded 
were  those  on  the  produce  of  whose  mines  the  world 
was  most  dependent  for  its  supply  of  the  precious 
metals.  The  serfs  became  the  personal  slaves  of  the 
conquerors,  or  swelled  the  ranks  of  their  armies. 

Such  were  the  causes  which,  in  swift  succession, 
reduced  the  labor-supply  of  the  mines  of  the  Empire. 
Meanwhile,  so  wasteful  had  been  the  operations  of 
the  "  farmers,"  that  the  earlier  emperors  had  been 
driven  to  assume  the  charge  of  the  mines,  which  were 
again  worked  by  public  officers  on  government  account. 
It  will  not  be  necessary  to  speak  of  the  various  meas- 
ures resorted  to  by  successive  emperors  to  stimulate  the 
failing  production  of  the  precious  metals;  of  grants  to 
individuals  to  work  mines  on  shares;  of  edicts,  issued 
almost  in  despair,  making  mining  as  "  free  "  as  many 
nowadays  wish  banking  to  be ;  of  efforts  to  systema- 


22  BIMETALLISM. 

tize  the  administration  of  the  mines  and  to  introduce 
scientific  knowledge  and  technical  skill  into  the  con- 
duct of  mining  operations.  The  production  of  the 
precious  metals  had  received  a  shock  from  which  it 
was  not  to  recover  for  a  thousand  years.  Under 
circumstances  and  conditions  so  adverse,  the  mining 
industry  was  doomed. 

"  We  may  safely  conclude,"  says  Mr.  Jacob,  "  that  after  the 
third  or  fourth  century  the  labor  of  extracting  the  precious 
metals  had  gradually  diminished  within  the  limits  of  the 
Roman  Empire ;  and  that,  from  the  fifth  century,  after  the 
more  afflicting  irruptions  of  the  barbarians  into  the  weak  and 
tottering  Western  Empire,  it  had  altogether  ceased."  "  In  the 
period  from  about  480  to  670  or  680,  the  greatest  diligence  has 
been  able  to  discover  no  trace,  in  any  author,  of  the  operations 
of  mining  having  been  carried  on." 

Meanwhile  the  vast  stock  of  precious  metals  which 
had  been  accumulated  before  the  Christian  era,  cut 
off  from  all  source  of  supply,  began  and  continued  to 
waste  away  at  a  rate  which  was  determined,  in  part 
by  the  necessary  conditions  of  coin  in  actual  circula- 
tion; in  part  as  the  result  of  war,  civil  disturbance, 
individual  violence,  and  the  accidents  of  fire  and  flood, 
or  the  sudden  death  of  the  owners  of  hidden  treasure. 
These  elements  cannot,  in  the  nature  of  the  case,  be 
computed.  To-day  the  most  skilled  statistician  would 
fail  to  determine,  even  only  approximately,  the  rate  of 
loss  by  abrasion  of  coin  *  and  by  consumption  in  the 
arts.  Much  less  could  the  historian,  looking  back 
upon  the  deeply  shrouded  ages  after  the  opening  of  the 

*  For  estimates  as  to  loss  by  abrasion  from  coins  of  different 
sizes,  see  Chevalier,  Baisse  Probable  de  I' Or,  pp.  101-2. 


EARL  Y  PRODUCTION  OF  PRECIOUS  METALS.      23 

Christian  era,  presume  to  measure  the  operation  of 
such  forces  in  such  a  time,  under  conditions  that  have 
so  largely  disappeared.  Mr.  Jacob,  in  his  well-known 
work  from  which  I  have  already  quoted,  undertaken  at 
the  instance  and  request  of  the  illustrious  English 
statesman  and  economist,  Huskisson,  feeling  himself 
obliged  to  make  some  statement  in  positive  form  re- 
garding this  matter,  has  tissumed  a  rate  of  loss,  for  the 
body  of  the  precious  metals  in  existence  at  the  time 
of  Augustus,  of  one  part  in  360,  each  year,  from  that 
time  onward  through  the  centuries.  Applying  this 
ratio,  he  reaches  the  startling  result  that  the  body  of 
gold  and  silver  in  the  Western  world,  which  he  esti- 
mates at  358  million  pounds  sterling,  for  the  year  14 
A.D.,  had  by  806  wasted  away  to  33  millions.  It  is 
not  necessary  to  accept  these  figures  as  truly  indicat- 
ing the  volume  of  the  precious  metals  in  the  year 
14,  or  in  the  year  806,  or  at  any  intermediate  year. 
Whether  the  treasure  of  the  Roman  Empire  under 
Augustus  amounted  to  358  millions  sterling,  or  only 
three-fourths,  two-thirds,  or  one-half  of  that  sum ; 
whether  the  process  of  decay  went  on  at  the  rate 
estimated  by  Mr.  Jacob,  namely,  one  part  in  360,  or 
at  a  rate  more  rapid  or  more  slow;  whether  the  stock 
of  806  A.D.  was  33  millions,  or  more  or  less,  does 
not  greatly  concern  us.  The  facts  are  undoubted, 
and  they  are  fairly  represented  by  the  figures  put 
forth  by  Mr.  Jacob,  (i)  that  the  world  of  Augustus 
was  in  possession  of  a  vast,  an  almost  inconceivably 
vast  amount  of  treasure,  which  never  could  have  been 
accumulated  under  the  operation  of  economic  laws, 
that  is,  if  free  men  had  had  to  be  hired  by  sufficient 


24  BIME  TA  LLISM. 

inducements  to  work  for  gold  which,  in  turn,  was  to  go 
into  the  channels  of  trade  and  affect  prices ;  (2)  that 
when  this  vast  body  was  at  its  greatest  extent,  the 
sources  of  supply  were  rapidly  and  violently  cut  off, 
in  the  general  way  described ;  and  thereafter,  for  gen- 
erations and  centuries,  the  existing  stock  was  left 
helplessly  subject,  without  restoration  or  repair,  to 
hostile  forces  which  never  ceased  to  work  upon  it, 
until  it  had  been  reduced  to  a  small  fraction  of  its 
former  mass. 


CHAPTER   II. 

AUGUSTUS   TO    COLUMBUS. 

AT  the  close  of  our  last  chapter  we  contemplated 
the  vast  stock  of  the  precious  metals  wasting  away 
under  continuous  wear  and  accidental  loss — all  sources 
of  supply  cut  off  by  the  destruction  of  the  mining 
industry — like  a  mighty  iceberg  drifting  into  southern 
seas,  melting  and  disappearing  at  a  rate  determined 
only  by  the  activity  and  intensity  of  the  hostile  forces 
acting  upon  it,  without  possibility  of  restoration  or  of 
repair.  This  state  of  things  lasted  for  centuries.  The 
practical  cessation  of  mining  industry,  during  a  period 
of  time  embracing  centuries,  created  a  situation  which 
is  interesting  to  the  student  of  monetary  science  in 
general;  and  has  a  special  bearing  on  the  particular 
question  we  are  to  consider.  We  have  here  an  abso- 
lutely pure  case  to  contemplate,  in  considering  the 
question  what  determines  the  value  of  money.  Inas- 
much as  the  precious  metals  are  usually  being  produced 
more  or  less  freely  at  the  time  in  which  an  author  is 
writing,  or  any  two  persons  are  discussing  the  subject; 
and,  inasmuch  as  the  cost  of  that  production  does 
unquestionably  sustain  a  certain  relation  to,  and  exer- 
cise a  certain  influence  upon,  the  value  of  the  product, 
there  is  always  a  strong  liability  to  form  an  exagger- 

25 


26  BIMETALLISM. 

ated  idea  regarding  the  degree  of  that  influence  and 
thus  lose  sight  of  the  forces  which  chiefly  control 
prices.  Every  one  who  has  read  extensively  in  the 
literature  of  money,  every  one  who  has  attended  at  all 
to  the  course  of  popular  discussion,  knows  how  per- 
sistent and  obtrusive  is  the  idea  of  present  cost  and 
present  volume  of  production,  as  explaining  changes 
in  the  values  of  the  day.  As  has  been  said,  there  is  a 
relation  here ;  but  that  relation  is  in  popular  estima- 
tion assigned  an  importance  which  sometimes  produces 
even  the  effect  of  falsehood.  It  is,  however,  in  the 
controversy  between  the  bimetallists  and  the  mono- 
metallists  that  these  exaggerated  views  have  produced 
their  greatest  effect  in  disguising  the  real  forces  at 
work  upon  prices. 

The  fact  is,  cost  of ,  production  has  nothing  to  do 
with  the  value  of  anything,  except  as  it  influences, 
or  may  in  the  immediate  future  influence,  the  supply, 
either  actual  or  potential.  This  statement  is  beyond 
the  reach  of  discussion.  ''  Labor  once  spent,"  says 
Prof.  Jevons,  "  has  no  influence  upon  the  future  value 
of  any  article."  Inasmuch,  however,  as  the  supply 
of  most  commodities  in  the  market  is  mainly  the 
result  of  yearly  production,  perhaps  of  production 
within  an  even  briefer  term,  it  is  natural  that  the  mind 
should  come  to  contemplate  present  cost  of  produc- 
tion, as  practically  determining  value.  In  the  case  of 
other  articles,  however,  which  have  years  of  life,  the 
correspondence  between  present  cost  of  production 
and  value  becomes  less  complete,  considerable  dis- 
crepancies appearing  and  remaining  through  a  long 
time.  But  it  is  in  the  case  of  the  precious  metals, 


AUGUSTUS    TO    COLUMBUS,  27 

which  might,  with  a  view  to  any  brief  period  be  called 
practically  indestructible,  that  present  cost  of  produc- 
tion has  the  smallest  influence  upon  value.  This  is 
a  familiar  principle;  it  has  been  mentioned  by  a  hun- 
dred writers  on  money ;  yet  I  have  seen  few  works 
from  the  monometallist  side  in  which  it  is  given  its 
proper  bearing  in  the  treatment  of  certain  important 
periods  of  the  world's  monetary  history;  and  I  find  in 
many  writers  an  almost  entire  neglect  of  that  consid- 
eration. Hence  it  seems  to  be  peculiarly  wholesome 
that  we  should  go  back  to  a  period  when  there  was 
no  cost  of  production,  because  production  did  not  take 
place:  where  we  can  contemplate  a  mass  of  money 
metal  as  completely  cut  off  from  any  influence  arising 
from  the  efforts  and  sacrifices  involved  in  its  produc- 
tion as  if  it  had  been  discharged  upon  our  earth 
through  the  explosion  of  some  other  planet.  For 
centuries,  the  precious  metals  which  had  been  gath- 
ered by  infinite  toil  and  sacrifice  on  the  part  of  un- 
counted generations,  remained  without  reinforcement 
or  repair  from  any  source,  wasting  slowly  away  under 
the  influences  that  have  been  described.  In  con- 
templating the  situation,  the  merest  tyro  in  economics 
cannot  fail  to  appreciate  the  true  relation  of  the 
volume  of  money  to  prices.  He  cannot  fail  to  see 
that  here  is  a  perfectly  pure  case  of  demand  and  sup- 
ply: just  as  truly  so  as  if  gold  and  silver  had  had  no 
cost  of  production  at  all,  but  were  furnished  by  Nature 
gratuitously,  in  limited  quantities.  What  the  value 
of  money,  under  these  conditions,  should  be,  would 
depend  solely  on  how  much  of  it  there  was,  and  how 
much  it  was  wanted. 


28  BIME  TA  LLISM, 

I  have  said  that  the  value  of  the  precious  metals, 
like  the  value  of  everything  else,  depends  wholly  upon 
the  relation  of  supply  and  demand,  cost  of  production 
being  only  important  as  it  shall  influence  the  future 
supply.  There  is,  however,  a  single  particular  in  which 
the  correspondence  between  metal-money  and  other 
commodities  fails.  This  cannot  be  better  stated  than 
in  the  words  of  John  Stuart  Mill,  as  follows: 

"  The  value  of  other  things  conforms  to  the  changes  in  the 
cost  of  production,  without  requiring  as  a  condition  that  there 
should  be  any  actual  alteration  of  the  supply  ;  the  potential  al- 
teration is  sufficient;  and,  if  there  even  be  an  actual  alteration, 
it  is  but  a  temporary  one,  except  in  so  far  as  the  altered  value 
may  make  a  difference  in  the  demand,  and  so  require  an  in- 
crease or  diminution  of  supply,  as  a  consequence,  not  a  cause, 
of  the  alteration  in  value.  Now  this  is  also  true  of  gold  and 
silver,  considered  as  articles  of  expenditure  for  ornament  and 
luxury;  but  it  is  not  true  of  money.  If  the  cost  of  production 
of  gold  were  reduced  one-fourth  by  the  discovery  of  more  fer- 
tile mines,  it  might  happen  that  there  would  not  be  more  of  it 
bought  for  plate,  gilding,  or  jewelry  than  before ;  and  if  so, 
though  the  value  would  fall,  the  quantity  extracted  from  the 
mines  for  these  purposes  would  be  no  greater  than  previously. 
Not  so  with  the  portion  used  as  money :  that  portion  could 
not  fall  in  value  one-fourth,  unless  actually  increased  one- 
fourth;  for,  at  prices  one-fourth  higher,  one-fourth  more 
money  would  be  required  to  make  the  accustomed  purchases; 
and,  if  this  were  not  forthcoming,  some  of  the  commodities 
would  be  without  purchasers,  and  prices  could  not  be  kept  up. 
Alterations,  therefore,  in  the  cost  of  production  of  the  precious 
metals  do  not  act  upon  the  value  of  money  except  just  in 
proportion  as  they  increase  or  diminish  its  quantity,  which  can- 
not be  said  of  any  other  commodity."  (Principles  of  Political 
Economy,  III.  ix.  3.) 

Returning  from  this  excursion,  let  us  again  consider 


AUGUSTUS    TO    COLUMBUS.  29 

the  monetary  situation  as  it  existed  at  the  time  when 
the  mining  industry  had  ceased  throughout  Europe, 
as  the  result  of  causes  which  have  been  indicated. 
We  have  no  data  regarding  prices  in  this  period  which 
would  afford  ground  for  any  induction ;  but  we  may 
fairly  assume  that  there  was  a  steady  rise  in  the  value 
of  gold  and  silver,  from  the  time  of  their  greatest  plenty, 
say,  under  Augustus,  on  to  the  time  when  the  stock 
reached  its  minimum — which,  merely  for  purposes  of 
illustration,  we  have  taken  at  the  date  given  by  Mr. 
Jacob,  namely,  806  A.D.  From  that  time  onward 
there  would  appear  to  have  been  a  slight  change  for 
the  better,  so  far,  at  least,  as  to  arrest  the  absolute 
waste  of  the  small  stock  remaining.  In  part,  this 
change  was  due  to  causes  which  cannot  be  defined, 
including,  doubtless,  minor  improvements,  from  age  to 
age,  in  the  mechanic  arts;  in  part,  to  the  increasing 
value  of  gold  and  silver,  arising  from  the  reduction  of 
the  stock,  which  incited  every  possible  producer, 
whether  the  royal  owner  of  mines  or  the  peasant  living 
by  the  bed  of  old  streams,  to  put  forth  the  utmost  en- 
ergy for  their  production;  in  part,  also,  to  the  dis- 
covery of  new  mines,  especially  of  silver.  The  Saracen 
invasion  of  Europe  caused  the  reopening  of  many  Span- 
ish mines  which,  under  the  Suevic  or  Gothic  monarchs, 
had  remained  untouched ;  and  these  for  a  time  made 
important  contributions  to  the  supply.  This  revival, 
under  the  Moors,  of  the  silver  production  of  Spain  was 
probably  due,  not  more  to  the  engineering  skill  of  that 
people  than  to  the  fact  that  their  conquests  had  given 
them  vast  numbers  of  Christian  slaves.  The  mines  of 
Saxony,  in  the  Hartz  district,  were  discovered  about 


3O  BIMETALLISM. 

the  tenth  century.  The  mines  of  Hungary,  especially 
at  Cremnitz,  had  begun  to  be  worked  even  earlier,  and 
have  not  yet  ceased  to  be  of  importance.  But  it 
was  the  mines  of  Austria — richest  in  mineral  wealth 
of  all  the  countries  of  Europe — which  constituted 
the  chief  source  of  supply  during  the  earlier  middle 
ages.  Yet,  if  some  slight  revival  of  mining  industry 
between  the  ninth  and  the  eleventh  centuries  may 
be  conceded  to  have  had  the  effect  of  putting  a  stop 
to  the  actual  waste  of  the  small  stock  that  remained 
out  of  the  vast  accumulations  of  the  early  Roman 
Empire,  metallic  money  still  remained  wofully  inade- 
quate. We  can  hardly  be  mistaken  in  attributing  to 
this  cause  much  of  the  hopelessness,  the  immobility, 
the  dull  acquiescence,  the  death-in-life  of  the  era  from 
the  barbarian  invasions  onward  for  centuries.  A  di- 
minishing money-supply,  especially  where  credit-sub- 
stitutes cannot  in  any  important  measure  be  introduced 
to  meet  the  wants  of  trade,  is  one  of  the  most  tremen- 
dous causes  of  mischief,  industrial,  social,  and  political, 
known  to  men.  The  wasting  away  of  the  vast  treasures 
of  Augustus,  generation  after  generation,  century  after 
century,  until  gold,  which  had  been  thrown  about  by  the 
handful  in  the  days  of  the  Roman  conquests,  became 
too  valuable  for  the  purposes  of  circulation,  and  what 
was  left  hid  itself  in  the  caskets  of  bankers  and  the 
cabinets  of  princes,  while  silver,  which  had  been  "as 
stones  in  the  streets  of  Jerusalem, "  grew  so  scarce  that 
much  of  the  coin  of  those  ages  became  mere  "black 
money,"  could,  in  the  nature  of  the  case,  not  have 
failed  to  produce  a  profoundly  discouraging,  a  contin- 
uously depressing,  influence  upon  trade  and  produc- 


AUGUSTUS   TO   COLUMBUS.  31 

tion  and  every  form  of  human  activity.  The  steady 
drag  upon  current  industry  and  enterprise,  due  to  the 
continuous  enhancement  of  the  burdens  derived  from 
the  past,  in  the  form  of  debts  and  fixed  charges;  the 
increase  in  the  weight  of  taxation,  which  seldom  lets 
up  as  the  value  of  the  money  in  which  it  is  to  be  paid 
advances;  the  deadly  cutting  into  the  profits  of  actual 
business  and  the  penalty  which  falling  prices  invariably 
place  upon  productive  enterprise,* — these  are  causes 
which  would  naturally  produce  precisely  the  effects  we 
contemplate.  It  was  the  course  of  the  crusades,  con- 
sidered as  a  whole,  but  especially  the  practical  results 
of  the  later  enterprises  for  the  recovery  of  the  Holy 
Land,  which,  so  far  as  we  may  judge,  with  such  im- 
perfect information,  brought  about  the  first  considera- 
ble improvement  in  the  condition  of  Europe,  so  far  as 
the  money-metals  were  concerned.  The  new  supply, 
to  what  we  have  thus  far  spoken  of  as  "  the  world," 
was  not  to  come  chiefly  from  its  own  .resources,  but 
from  a  region  which,  in  the  economic  sense,  could 
hardly  be  thought  of,  at  that  time,  as  of  the  same 
sphere  with  Europe  and  the  parts  of  Asia  which  border 
upon  the  Mediterranean,  the  Black,  and  the  Caspian 
Sea.  To  the  economist,  as  to  the  historian  and  the 
philosopher,  THE  EAST  has  ever  been  a  land  of  pro- 
found significance  and  deep  mystery.  The  domination, 
there,  of  custom,  in  the  place  of  contract,  the  force  of 
caste  and  tradition,  the  immobility  and  fatalistic  spirit 
of  those  populations,  their  disposition  to  regard  the 
precious  metals  as  an  end  in  themselves,  mark  India 
off  from  the  rest  of  the  world,  in  the  view  of  the 

*  See  pp.  200,  201. 


32  BIMETALLISM. 

economist  even  more  distinctly,  if  that  be  possible, 
than  in  the  view  of  the  student  of  law  or  of  religion. 
The  impulse  which  the  earlier  crusades  gave  to  the 
intellectual  and  commercial  activity  and  ambition  of 
Europe  was  immensely  heightened  by  the  practical 
effects  of  the  later  crusades,  bringing  into  circulation 
great  treasures  which  had,  under  the  Oriental  instinct 
of  hoarding,  escaped  destruction,  and,  also,  bringing 
under  European  control  the  most  productive  mines  of 
gold  then  in  working.  Venice,  especially,  profited  by 
the  crusades,  not  only  securing  vast  treasures  by  the 
expedition  which  captured  Byzantium  at  the  beginning 
of  the  thirteenth  century  and  seated  Baldwin  on  the 
Eastern  throne,  but  acquiring  possession  of  extensive 
territories,  embracing  the  Crimaea.  The  middle  of 
the  century  had  scarcely  been  reached  when  the  results 
of  the  new  supply  were  seen  in  the  gold  coinages  of 
Italy.  To  the  statement  already  made  that  gold  after 
the  fifth  century  had  practically  disappeared  from  cir- 
culation, two  exceptions  require  to  be  made ;  one  in 
regard  to  the  continued  coinage  of  that  metal,  though 
not  in  large  amounts,  by  the  Moors  of  Spain ;  the  other, 
and  by  far  the  more  important,  in  regard  to  the  mint- 
ing of  gold  at  Byzantium,  the  seat  of  the  Eastern 
Empire.  Gold  coins  of  a  high  degree  of  perfection 
continued  to  be  produced  here,  throughout  the  ages  of 
greatest  depression.  These  coins  enjoyed  the  greatest 
reputation  all  over  Europe,  as  the  occurrence  of  their 
name,  byzants,  in  countless  places  in  history  and  litera- 
ture, testifies.  In  1252,  as  the  date  is  usually  given,* 

*  See  Shaw's  History  of  Currency,  p.  3. 


AUGUSTUS    TO   COLUMBUS.  33 

Florence  put  forth  the  gold  coin  destined  to  become 
so  famous  under  the  name  of  florins,  and  to  furnish 
the  type  for  the  coinages  of  many  nations.  Moved  by 
this  example,  within  a  short  time  Genoa  coined  gold ; 
England  manufactured  her  gold  "  pennies" ;  France, 
under  St.  Louis,  produced  coins  of  gold,  and  Venice 
coined  the  zechin. 

The  institution  of  gold-coinage  gives  us  our  subject. 
Thus  far  we  have  spoken  mainly  of  the  precious 
metals  in  the  aggregate,  or  of  gold  alone,  referring  to 
silver  only  occasionally,  and  then  rather  as  a  comple- 
ment to  gold  in  forming  the  aggregate  of  precious 
metals,  than  as  a  competitor,  or  as  an  object  of  ex- 
change for  gold.  In  but  a  few  instances  have  we  had 
reason  to  refer  to  them  as  pitted  against  each  other. 
In  these  instances,  the  references  have  generally  been 
of  a  nature  disparaging  to  silver.  But  the  gold-coin- 
ages of  Italy,  France,  and  Northern  Europe,  in  the 
thirteenth  and  fourteenth  centuries,  brought  up  at 
once,  in  an  active  form,  the  question  of  the  relative 
value  of  the  two  metals.  The  theory  of  bimetallism 
did  not  then  exist.  Still,  at  the  very  beginning,  it  was 
necessary  to  take  some  ratio ;  and  this  created  an  issue 
of  a  very  important  and  a  very  troublesome  nature. 
The  history  of  the  coinage  laws  of  Europe  exhibits  an 
unceasing  struggle  on  the  part  of  the  several  states  to 
attract  and  to  keep,  each  for  itself,  a  sufficient  supply 
of  each  of  the  two  metals.  This,  in  those  days,  meant 
getting  the  money-metals  away  from  other  states;  and 
every  contrivance  and  sacrifice  was  resorted  to  for  the 
purpose:  changes  in  valuation,  proclamation  on  proc- 
lamation, penalties  on  the  exportation  or  melting  down 


34  BIMETALLISM. 

of  money,  premiums  on  its  introduction  from  abroad.* 
It  would  be  difficult  to  exaggerate  the  fatuousness  of 
the  policies  adopted,  or  the  degree  of  failure  which 
usually  resulted. 

Four  things  require  to  be  said  in  qualification  of  the 
impression  which  the  story  of  these  struggles  for  the 
possession  of  the  world's  stock  of  the  precious  metals, 
in  early  ages,  is  calculated  to  produce  on  the  mind  of 
the  reader.  First,  it  is  very  difficult  to  get  at  the  facts 
with  confidence.  Secondly,  the  scheme  was  prose- 
cuted with  an  utterly  false  idea  as  to  the  true  interest 
of  nations  in  respect  to  the  acquisition  and  retention 
of  the  precious  metals.  The  notion  that  money  was 
the  sole  wealth  had  almost  complete  possession  of  the 
minds  of  the  people  of  those  days,  statesmen,  mer- 
chants, and  the  populace  alike;  and,  consequently, 
there  were  bitter  complaints  and  a  great  outcry  re- 
garding the  export  of  the  precious  metals,  even  when 
due  to  a  movement  which  was,  according  to  the  wiser 
philosophy  of  the  present  day,  in  the  nature  of  a 
beneficent  distribution.  Thirdly,  the  failure  of  the 
coining  authorities  to  issue  fractional  money,  as  is  now 
universally  done,  at  a  value  relatively  less  than  that  of 
the  principal  coins,  gave  rise  to  an  infinite  amount  of 
distress  and  complaint,  which  was  absolutely  unneces- 
sary, as  in  no  way  or  degree  involved  in  the  proper 
working  of  bimetallism,  f 

The  fourth  point  to  be  noted  in  this  connection  is 
that  the  whole  matter  of  the  relations  of  the  two 
metals,  in  this  period,  is  greatly  and  almost  inextri- 

*  See  Chevalier,  Baisse  Probable  de  fOr,  p.  175. 
f  See  pp.  62-4,  following. 


AUGUSTUS    TO    COLUMBUS,  35 

cably  complicated  by  abuses  of  the  coin,  on  the  part 
either  of  the  coining  government  or  of  sweaters  and 
counterfeiters,  or,  more  commonly,  of  both.  The 
official  rascality  of  those  times  often  put  private 
roguery  to  shame.  There  was  scarcely  a  trace  of 
regard  for  national  honor  or  of  respect  for  the  right  of 
the  community  to  a  sound  currency,  while  the  actions 
of  many  rulers  were  highly  flagitious.  Prof.  Thorold 
Rogers  says: 

"  Hardly  a  European  government  fulfilled  the  duty,  even  if 
they  understood  and  acknowledged  it.  But  the  kings  of 
France  were  the  principal  offenders.  They  diminished  the 
amount  of  silver  in  their  coins.  This  is  a  temporary  wrong, 
a  remediable  offence.  But  they  debased  it  also,  a  far  more 
serious  and  lasting  evil.  Philip  the  Fair  was  threatened  with 
excommunication  by  Boniface  the  Eighth  for  this  fraud,  and  was 
branded  as  long  as  time  lasts  by  Dante  for  his  offence.  .  .  . 
But  the  greatest  offender  in  this  particular  was  the  unlucky 
John,*  the  prisoner  of  Poitiers.  .  .  .  Owing  to  this  king's  prac- 
tices— whom  the  romances  called  the  Good — the  value  of  the 
currency  underwent  seventy  changes  in  ten  years.  John  took 
an  oath  of  his  moneyers  that  they  would  keep  his  frauds  a  pro- 
found secret,  especially  from  the  merchants.  .  .  .  To  me  the 
weakness  of  France,  during  the  century  1340-1440,  seems  to  be 
directly  traceable  to  economical  causes,  to  the  universal  dis- 
trust which  these  royal  frauds  induced. f  .  .  .  Exactly  similar  re- 
sults, though  perhaps  of  a  less  serious  kind,  attended  the  frauds 
of  Henry  VIII.  and  the  Protector  Somerset."  (Hist.  Glean- 
ings, I.  95-97-) 

*  Prof.  Rogers  elsewhere  calls  him  "a  smasher  in  his  own 
mint,  a  swindler  of  his  own  people." 

f  In  section  V  of  his  Baisse  Probable  de  I'Or  M.  Chevalier 
gives  an  account  of  the  French  coinages  and  the  debasement 
wrought  by  successive  monarchs. 


36  BIMETALLISM. 

The  irregular  and  often  secret  progress  of  the  cor- 
ruption and  debasement  of  the  coin  of  a  country 
might,  as  will  readily  appear,  so  pervert  the  relation 
between  the  coinage  of  the  two  metals  as  to  produce 
an  impression  on  the  student  of  money  directly  con- 
trary to  the  truth.  Thus,  suppose  a  certain  class  of 
gold  coins,  newly  imported  from  abroad  or  fresh  from 
the  local  mints,  to  come  into  competition  with  coins 
of  silver,  at  a  legal  ratio  disparaging  to  the  latter. 
The  silver,  then,  being  underrated,  would,  according 
to  the  usual  statement,  flow  away  to  some  market 
where  it  brought  a  better  price  in  gold.  Yet,  in  fact, 
the  silver  coins  might  be  found  so  generally  abraded 
and  corrupted  that  it  would  be  the  gold  which  would 
be  exported,  in  spite  of  all  the  efforts  of  the  govern- 
ment to  retain  it.  Such  a  result  would  seem  to  show 
that  gold  was  underrated  in  the  coinage,  whereas,  in 
truth,  it  was  only  undervalued  in  exchange  for  the 
actual,  debased  silver  coins  in  circulation.  It  will  be 
seen  that  such  a  possibility  should  make  any  student 
of  mediaeval  moneys  at  times  exceedingly  doubtful  as 
to  the  real  cause  of  a  perhaps  continuous  and  persist- 
ent bullion  movement. 

However  far  the  force  of  the  foregoing  considera- 
tions may  extend,  the  general  fact  is  not  to  be  denied 
that,  from  the  beginning  of  the  gold  coinage  of  the 
thirteenth  century  on  to  the  discovery  of  America, 
the  legislative  and  executive  edicts  and  proclamations 
of  the  States  of  Europe  exhibit  countless  efforts  to 
keep  one  or  the  other  metal  from  slipping  away.  This 
acknowledgment  might  be  extended  too  far.  Great 
ostensive  instances  of  the  inability  of  law  to  control 


AUGUSTUS    TO    COLUMBUS.  37 

the  actions  of  men  in  view  of  pecuniary  temptations 
have  given  rise  to  sweeping  generalizations  and  easy 
predictions  which  are  not  justified  by  a  closer  exami- 
nation of  the  facts.  Some. very  bad  history  and  very 
bad  political  economy  has  come  to  be  written  in  this 
way.  Listen  to  the  words  on  this  subject  of  Mr.  John 
Stuart  Mill,  a  philosopher  whose  reputation  for  sound 
and  calm  wisdom  stands  higher  to-day  than  it  did  at 
his  death,  twenty-five  years  ago.  Mr.  Ricardo,  in  his 
famous  tract.  The  High  Price  of  Bullion,  having  said: 
"  It  is  by  all  writers  indiscriminately  allowed  that  no 
penalties  can  prevent  the  coin  from  being  melted  when 
its  value  as  bullion  becomes  superior  to  its  value  as 
coin,"  Mr.  Mill  remarks:  "  The  effect  of  prohibition 
cannot  have  been  so  entirely  insignificant  as  it  has 
been  supposed  to  be  by  writers  on  the  subject.  The 
facts  adduced  by  Mr.  Fullarton  *  show  that  it  re- 
quired a  greater  percentage  of  difference  in  value 
between  coin  and  bullion  than  has  commonly  been 
imagined,  to  bring  the  coin  to  the  melting-pot." 
(Political  Econ.,  III.  IX.  i.)  This  statement  is  just. 
The  assertion  that  prohibitions  and  penalties  are  im- 
potent to  prevent  or  check  the  melting  or  export  of  a 
metal  which  is  undervalued  in  the  coinage,  is  opposed 
to  experience  and  to  reason.  It  would  be  as  sensible 
to  say  that  government  can  never  collect  any  revenue 
from  imports,  because  it  will  always  be  for  the  interest 
of  the  importer  to  evade  the  payment  of  duties.  It  is 
true  that,  as  the  rate  of  duty  rises,  the  temptation  to 
smuggling  increases.  It  is  also  true  that,  on  certain 

*  The  Regulation  of  Currencies,  pp.  7-9,  footnote, 


38  BIMETALLISM. 

kinds  of  articles,  easily  transported  and  concealed,  the 
rate  of  duty  may  be  raised  so  high  that  smuggling  will 
become  general.  But,  on  the  other  hand,  it  may  be 
said,  first,  that,  on  even  the  articles  most  easily  trans- 
ported  and  concealed,  very  high  duties  never  cause 
commodities  wholly  to  escape  impost ;  secondly,  that 
in  regard  to  most  articles,  such  as  are  somewhat  less 
easily  transported  and  concealed,  moderate  duties, 
even  duties  pretty  stiff  and  onerous,  are  collected  with 
but  small  loss  from  smuggling;  thirdly,  that,  in  regard 
to  articles  still  less  favorably  related  to  smuggling,  the 
customs  lists  of  any  protective  country  are  full  of  in- 
stances where  duties  not  inconsiderable  are  paid  on 
substantially  every  yard  or  pound  or  bushel  imported. 
It  is  little  less  than  ridiculous  to  say  that,  while 
importers  are  so  far  mindful  of  pains  and  penalties, 
exporters  are  absolutely  indifferent  to  them ;  to  admit 
that  the  United  States  collects  a  duty  of  ten  per  cent 
on  nearly  the  whole  amount  of  diamonds  brought 
into  the  country,  yet  to  assert  that  gold,  a  far  bulkier 
product,  would  go  out,  against  no  matter  what  pro- 
hibitions, for  the  sake  of  a  quarter  of  one  per  cent 
profit.  Importers  and  exporters  are  alike  human 
beings,  of  the  same  feelings,  fears,  affections,  appe- 
tites; and  are  equally  influenced  by  pains  and  penal- 
ties. 

We  here  see  the  justice  of  Mr.  Mill's  correction  of 
the  familiar  generalization  regarding  the  inefricacy  of 
laws  regulating  the  trade  in  the  precious  metals,  which 
is  precisely  of  a  kind  with  a  lot  of  the  economic  propo- 
sitions of  a  certain  school.  Such  inhibitions,  in  the 
naturq  of  the  case,  cannot  be  without  result.  The 


AUGUSTUS    TO    COLUMBUS.  39 

question  is  wholly  one  of  proportion,  like  most  things 
in  this  world.  The  chance  of  losing  fortune  or  liberty 
or  life  has  to  most  men  a  money-value.  Set  the 
price  too  high,*  and  they  will  defy  the  law  and  take 
their  chances.  But  to  say  that  such  a  danger  is  not 
a  condition  which  will  influence  the  action  of  men,  is 
unreasonable.  In  his  Practical  Observations,  Mr. 
Bosanquet  remarks,  regarding  the  Report  of  the 
Bullion  Committee:  "  The  conscience  of  the  exporter 
and  the  value  of  a  false  oath  are  correctly  stated  by 
the  committee  at  four  and  one-half  per  cent."  The 
market  price  of  consciences  would  seem  to  have  fallen 
in  the  course  of  a  century,  for  "  A.  V.,"  in  his  letter 
to  Lord  Godolphin,  in  1696,  speaks  of  twenty  per  cent 
as  "  a  good  alloy  for  any  scruple  of  conscience  "  in 
the  melting  of  the  coin.  I  will  cheerfully  concede 
that  a  profit  of  less  than  four  and  a  half  per  cent 
would  now  suffice  for  a  very  considerable  movement 
of  bullion,  in  spite  of  law  and  penalties  and  manifests 
and  steam  revenue-cutters;  but,  as  one  who  believes 
that  political  economy  should  have  some  relation  to 
common-sense,  I  feel  bound  to  protest  against  the 
"  orthodox  "  opinion  on  the  subject  under  considera- 
tion. 

Let  us  now,  without  attempting  a  complete  analysis 
at  this  stage,  inquire  a  little  more  closely  regarding 
the  economic  principle  which  governs  in  this  matter 
of  the  export  or  melting  of  undervalued  coin.  When 


*  The  newspapers  state  that  since  the  duty  in  diamonds  has 
been  raised  to  25  per  cent  by  the  new  tariff  of  the  United  States, 
the  receipts  have  fallen  off. 


40  BIMETALLISM. 

a  youthful  student  of  political  economy,  I  may  have 
read  something  about  Gresham's  Law;  though  I  can- 
not remember  when  or  where.  While  still  a  youthful 
professor  of  political  economy,  I  sometimes  made 
mention  of  that  Law,  or  Theorem;  but  the  public 
generally,  twenty  or  only  five  years  ago,  were  about 
as  liable  to  meet  such  an  allusion,  as  is  the  newspaper 
reader  of  to-day  to  encounter  a  reference  to  Mariotte's 
Law  or  Taylor's  Theorem.*  Of  late,  however,  this 
term  has  been  much  more  frequently  used.  To-day, 
the  name  of  the  London  banker  is  in  everybody's 
mouth.  No  monometallist  thinks  he  can  talk  about 
the  currency  unless  he  quotes  that  highly  meritorious 
financier.  Without  inquiring  how  far  Sir  Thomas 
Gresham  is  really  entitled  to  be  regarded  as  the  dis- 
coverer, let  us  inquire:  What  is  Gresham's  Law  ?f 


*  In  the  index,  comprising  forty-four  pages,  in  double  column, 
and  containing,  probably,  more  than  two  thousand  separate  titles, 
which  concludes  Thorold  Rogers's  highly  annotated  edition 
of  Adam  Smith's  Wealth  of  Nations,  neither  Sir  Thomas 
Gresham  nor  his  Law  is  mentioned.  This  would  seem  to  indicate 
that  Adam  Smith,  at  least,  was  not  aware  that  the  founder  of  the 
Royal  Exchange  of  London  had  also  discovered  a  principle  as 
fundamental  in  the  monetary  as  is  gravitation  in  the  solar  sys- 
tem ;  and,  moreover,  that  Prof.  Rogers  did  not  feel  it  incumbent 
on  him  to  supply  Dr.  Smith's  omission.  Penelope,  Mithridates, 
and  Hyder  Ali  are  mentioned;  but  not  Gresham.  In  my  own 
large  work  on  Money  (1878),  I  find  Gresham  twice  mentioned, 
once  in  connection  with  the  fact  that  at  the  time  of  his  death 
his  wealth  was  found  to  be  largely  in  rings,  chains,  and  orna- 
ments ;  the  other,  in  connection  with  the  law  under  consideration. 

f  I  would  refer  the  reader  to  an  important  article  by  Sir  R. 
Giffen  in  the  British  Economic  Journal,  vol.  I.  pp.  305-6.  After 
stating  that  the  phrase  "drives  out,"  in  the  ordinary  statement  of 


AUGUSTUS    TO    COLUMBUS.  4! 

As  most  frequently  stated,  it  is  that  bad  money 
always  drives  out  good  money;  or,  preferably,  that, 
if  two  kinds  of  money  come  into  circulation  in  any 
community,  the  worse,  or  less  valuable,  will  drive  out 
the  better,  or  more  valuable.  Thus  stated,  the  theorem 
is  not  true.  You  might  as  well  say  that,  if  there  be 
good  carriages  and  poor  carriages  in  any  city,  the  pooV 
carriages  will  not  be  used.  If  both  the  good  carriages 
and  the  poor  carriages,  together,  furnish  no  larger 
means  of  conveyance  than  the  community  have  need 
of,  people  wishing  transportation  will  hire  the  good 
carriages,  so  long  as  these  are  to  be  had ;  and  then 
come  down  to  the  poor  carriages,  as  better  than  walk- 
ing. And  that  might  be  the  case  whether  the  one 
sort  of  carriages  was  poorer  than  the  other  by  one  per 
cent,  or  five,  or  fifty.  If,  however,  the  total  number 
of  carriages  becomes  in  excess  of  the  wants  of  the 
community,  the  worse  will  gradually  fall  out  of  use. 
They  will  one  by  one,  as  they  break  down,  instead  of 

Gresham's  Law,  does  not  necessarily  mean    "causes   the   export 
of,"  the  author  goes  on  to  say  : 

1.  The  underrated  metal  may  be  hoarded. 

2.  The  underrated  metal  may  be  used  in  actual  circulation,  at  a 
market  ratio  different  from  the  legal  ratio. 

3.  "  Coins  of  the  underrated  metal  may  circulate  as  a  species 
of  token  money,  either  because  there  has  been  a  heavy  seignior- 
age on  them,  or  because  they  have   become  worn  and  deterio- 
rated, so  that  they  occupy  the  same  place,  and  do  the  same  work 
as  token  coinage,  of  a  different  metal  than  the  standard,  does  in  a 
monometallic   system.     This   was   notably   the   case    in    England 
with  the  silver  coinage  during  the  last  century.     Silver  was  under- 
rated, and  gold   had  become   the  standard  ;  but  a  silver  coinage 
of  a  very  bad  description  remained,  which  was  used  exactly  as 
the  silver  token-coinage  is  now  used," 


42  BIME  TA  LLISM. 

being  sent  to  the  blacksmith  or  wheelwright  for 
repairs,  be  laid  aside  altogether,  or  sold  to  poorer  com- 
munities. 

In  like  manner,  the  proposition  that  has  been  stated 
regarding  money  must  be  extended  to  include  the 
proviso  that  the  sum  of  the  two  sorts  of  money  is  in 
excess  of  the  wants  of  the  trade  of  that  community,  as 
determined  by  Ricardo's  Law  of  the  territorial  distri- 
bution of  money.  "  It  is  a  mistaken  theory,"  Ricardo 
writes,  in  his  Reply  to  Bosanquet,  "  to  suppose  that 
guineas  of  5  dwt.  8  gr.  cannot  circulate  with  guineas 
of  5  dwt.  or  less.  As  they  might  be  in  such  limited 
quantities  that  both  the  one  and  the  other  might 
actually  pass  in  currency  for  a  value  equal  to  5  dwt. 
10  gr.,  there  would  be  no  temptation  to  withdraw 
either  of  them  from  circulation ;  there  would  be  a  real 
profit  in  retaining  them."  But  if  the  sum  of  the  two 
kinds  of  money  in  a  country  comes  to  be  in  excess  of 
that  country's  distributive  share  of  the  world's  money, 
the  force  referred  to  will  begin  to  operate.  Is  it  asked 
how  this  takes  place  ?  I  answer,  through  the  normal 
working  of  the  principle  of  self-interest,  which  is  all 
we  have  to  go  by  in  dealing  with  matters  of  finance 
and  currency.  There  is  here  no  question  of  patriot- 
ism, or  philanthropy,  or  sentiment.  These  last  have 
some  room  to  operate  in  the  warehouse  and  the  sales- 
room; more,  in  the  factory  or  works;  more,  still,  on 
the  land;  but  in  the  bank,  none.  All  reasoning  which 
assumes  that,  in  the  exchange  of  moneys,  any  princi- 
ple can  be  substituted  for  that  of  individual  self-inter- 
est must  be  futile  and  delusive. 

The  operation  of  self-interest  in  the  matter  under 


AUGUSTUS    TO    COLUMBUS.  43 

consideration,  is  as  follows:  By  the  Ricardian  princi- 
ple, a  country's  (or  a  community's)  distributive  share 
of  the  world's  money  is  that  amount  which  will  keep 
its  prices  substantially  on  a  level  (tariffs  and  cost 
of  transportation  in  all  its  elements,  time,  freight 
charges,  insurance,  commissions,  etc.,  being  taken  into 
account)  with  prices  in  the  countries  with  which  it 
trades.  If,  in  any  country,  money  comes  to  be  in 
excess  of  the  amount  thus  determined,  prices  will  rise : 
that  country  will  be  a  good  country  to  sell  to,  because 
prices  are  high  there ;  it  will  be  a  bad  country  to  buy 
from,  for  the  same  reason.  Imports  thus  increasing 
and  exports  thus  diminishing,  the  balance  of  trade  will 
turn  against  the  country  in  question;  and  money  will 
be  exported  to  settle  the  account.  This  process  will 
go  on  until  equilibrium  is  reached,  that  is,  until  the 
money  in  the  country  is  reduced  to  its  distributive 
share  of  the  general  circulation.  In  such  exportation 
of  money,  the  better  sort  will  be  the  one  to  go. 
Since  it  has,  at  home,  no  more  power  in  exchange 
than  the  poorer  sort,  while  it  will  receive  a  preference 
abroad,  the  normal  operation  of  the  principle  of  self- 
interest  will  cause  its  selection  for  that  purpose.  This 
does  not  mean  that  all  of  the  better  sort  will  necessarily 
be  exported.  Just  so  much  will  remain  as  is  needed 
to  make  up  the  amount  of  money  required  for  domes- 
tic circulation.  The  process  described  will  be  expedited 
by  the  melting  of  coin  (assuming  now  that  we  are 
speaking  of  metal  money)  for  use  in  the  arts,  whether 
industrial  or  decorative.  A  plump  coin  will  have  no 
more  power  in  exchange  than  a  thin  one,  but  it  will 
.tell  for  more  in  the  melting-pot,  I  have  thus  far 


44  BIME  TA  LLISM. 

spoken  as  if  the  two  sorts  of  money  were  light  and 
heavy  money  of  the  same  metal;  but  the  principle 
applies  with  equal  force  to  two  sorts  of  money  made 
of  different  metals.*  If  a  country  have  coined  money 
of  gold  and  money  of  silver,  at  a  mint-ratio  which, 
considering  the  ratio  the  metals  bear  to  each  other 
elsewhere,  disparages  either  gold  or  silver,  it  will  be 
the  metal  undervalued  at  home  which  will  go  abroad, 
under  the  circumstances  previously  described;  this 
also  will  be  the  metal  to  go  into  the  melting-pot. 

But  we  are  dwelling  too  long  on  the  theory  of 
Money.  Let  us  go  on  at  once  to  the  greatest  event 
of  a  thousand  years,  which  occurred  just  at  the  close 
of  the  fifteenth  century,  the  economic,  social,  and 
political  consequences  of  which  the  world  is,  every 
generation,  coming  more  fully  to  understand  and 
appreciate.  We  have  seen  the  mighty  mass  of  the 
precious  metals,  accumulated  in  the  early  ages, 
brought  under  Roman  dominion  and  subjected  at 
once  to  the  operation  of  economic  laws  and  to  a  riot- 
ous and  wasteful  alienation.  We  have  seen  that 
stock  dwindle  under  wear  and  accidental  loss  until, 
at  the  beginning  of  the  ninth  century,  it  is  estimated 
at  but  a  tithe  of  its  original  bulk.  We  have  seen  the 
beginnings  of  causes  operating  to  check  the  further 
destruction  of  the  small  store  remaining,  and  even, 
later,  to  work  some  slight  repair  of  the  mischief 
done.  We  have  seen,  at  last,  the  tide  turn  with  force, 
bringing  to  the  shores  of  Europe  treasures  of  the 

*  Sir  Thomas  Gresham,  however,  did  not  pursue  the  principle 
so  far.  His  statement  relates  only  to  different  qualities  of  coin 
of  the  same  metal, 


AUGUSTUS    TO   COLUMBUS.  45 

Orient  which  had  escaped  the  devastation  of  ages, 
while  a  revival  of  the  mining  industry  in  some  of  its 
familiar  seats,  and  the  opening  of  fresh  sources  of 
supply,  allowed  the  re-introduction  of  gold-coinage  and 
furnished  commerce  the  means  of  extending  its  opera- 
tions wider  and  wider,  as  new  arts  and  industries  arose 
throughout  Europe,  especially  in  the  Northern  lands. 
In  1492,  Columbus,  sailing  westward  to  seek  a  new 
route  to  the  Indies  and  to  Cathay,  landed  upon  one 
of  the  islands  of  the  American  coast ;  and,  on  his  fourth 
and  last  voyage,  reached  the  mainland.  The  actual 
treasure  which  the  great  discoverer  and  his  immediate 
successors  brought  back  to  Spain  was  comparatively 
small ;  but,  with  that  singular  power  which  the  pre- 
cious metals  have  always  exercised  over  the  thoughts 
and  passions  of  men,  it  sufficed  to  inflame  the  imagi- 
nation of  the  Old  World  and  incite  to  unceasing 
enterprises.  It  is  not  necessary  to  recite  that  long 
and  horrible  story  of  rapacity  and  cruelty.  In  1519 
Cortez  invaded  Mexico;  in  1521  the  conquest  of  that 
country  was  complete.  For  the  first  time  the  Old 
World  dreams  of  uncounted  gold  were  realized.  The 
treasures  of  the  Montezumas  were  poured  into  the 
coffers  of  Spain;  and  one  of  the  greatest  economic 
movements  of  history  began.  A  decade  later,  Pizarro 
invaded  Peru ;  and  the  wealth  of  the  Incas  fell  into 
the  hands  of  the  conquerors. 

But  it  was  not  by  plundering  the  storehouses  of 
monarchs  that  the  main  fruits  of  the  Spanish  conquests 
were  to  be  realized.  Had  this  been  all,  Spain  would 
have  been  repaid  for  her  costly  enterprises;  there 
would  have  been  a  perceptible,  a  welcome  increase  in 


46  BIME  TA  LLISM. 

the  money-supply  of  the  Old  World ;  the  daring  ad- 
venturers would  have  been  richly  rewarded  for  all  their 
toil  and  danger:  a  few  great  families  would  have  been 
founded ;  but  there  would  have  been  no  world-wide 
revolution  of  industry,  commerce,  and  finance.  Nor 
was  it  in  the  form  of  gold,  so  passionately  coveted, 
that  the  Spanish  conquests  were  to  make  their  chief 
contribution  to  the  monetary  system  of  the  Old  World. 
At  about  the  same  time,  in  the  same  year  it  is  said, 
namely,  the  year  1545,  two  important  discoveries  took 
place,  the  discovery,  by  the  Mexican  Medina,  of  the 
process  of  amalgamation  as  applied  to  the  extraction 
of  silver,  and  the  discovery  of  the  rich  mines  of  Potosi, 
in  Peru.  This  it  was  which  changed  the  industrial  face 
of  Europe;  redistributed  the  political  power  of  man- 
kind; hastened  the  downfall  of  ancient  systems;  and 
went  far  to  create  the  modern  world.  In  comparison 
with  the  floods  of  silver  which  poured  from  the  newly 
opened  mines,  especially  under  the  impulse  given  by 
the  adoption  of  the  amalagamation-process,  in  place  of 
the  simple  and  rude  devices  for  extracting  the  metal 
from  its  ores  employed  by  the  ignorant  natives,  all  the 
wealth  gathered  from  the  spoil  of  palaces  was  incon- 
siderable. Mr.  Jacob  estimates  the  average  annual 
amount  of  gold  and  silver  shipped  from  the  New  World, 
1492  to  1521,  at  only  £5 2,000.  For  twenty-five 
years,  from  the  capture  of  Mexico  to  the  discovery  of 
Potosi,  Humboldt  estimates  the  annual  yield,  or 
plunder,  at  £630,000,  giving  a  total  for  the  period  of 
£17,058,000,  or  nearly  one-half  the  amount  estimated, 
though,  it  must  be  said,  very  loosely,  by  Mr.  Jacob, 
as  being  in  the  Western  world  in  806.  The  mines  of 


AUGUSTUS   TO   COLUMBUS.  47 

Potosi,  alone,  were  before  the  close  of  the  century  to 
produce  an  amount  transcending  both  the  old  stock 
and  the  new  supplies. 

It  was  not,  according  to  the  best  authorities,  until 
about  1560  or  1570  that  the  floods  of  the  precious 
metals  from  America  began  very  sensibly  to  affect 
prices  throughout  Western  Europe.  This  procrastina- 
tion of  the  effect  naturally  to  have  been  anticipated 
from  the  incoming  of  such  vast  amounts  of  treasure 
was  not  due  to  any  efforts  to  retain  it  on  the  part  of 
Spain,  into  whose  ports  the  new  silver  came  and  out 
of  whose  ports  it  passed  to  other  countries.  Bigoted 
and  reactionary  as  were  the  ruling  powers  of  that 
country,  it  was  impossible,  even  in  that  day  of  unen- 
lightened mercantilism,  that  Spain  should  regard  it  as 
for  her  national  interest  to  retain  the  precious  freight 
of  her  arriving  galleons  and  make  it  royal  treasure. 
There  were,  indeed,  one  or  two  attempts  to  readjust 
the  ratio  between  gold  and  silver;  but,  in  the  main, 
the  policy  of  the  government  was  that  of  inaction  and 
contentment.  .  There  was  no  purpose  manifest  to 
make  these  wonderful  gifts  of  the  New  World  minister 
to  the  growth  of  manufactures  or  provide  the  perma- 
nent endowment  of  great  industries.  Spain  was  satis- 
fied at  once  to  live  high  on  this  unearned  bounty 
and  to  use  the  surplus  for  carrying  on  her  schemes  of 
conquest  and  colonization.  Her  fleets  and  armies,  in 
both  hemispheres,  consumed  no  small  part  of  the 
wealth  thus  lavishly  placed  at  her  disposal.  Spain 
became,  and  for  a  century  or  two  remained,  the 
greatest  military  power  of  Europe;  and,  at  the  end  of 
that  career,  sank  into  hopeless  insignificance,  having 


48  BIMETALLISM. 

neither  arts  nor  arms  to  command  influence  among 
the  nations. 

The  fact  that  the  new  silver  did  not  earlier  produce 
large  effects  upon  general  prices  over  Western  Europe 
may  be  attributed  to  two  causes.  The  first  was  that 
brought  out  so  admirably  by  Prof.  Cliffe  Leslie  and 
Prof.  Cairnes,  in  their  essays  dealing  with  this  theme, 
namely,  the  delay  necessarily  involved  in  the  propaga- 
tion of  economic  forces  or  economic  shocks,  from  one 
object  to  another,  from  one  class  in  the  community  to 
another,  from  one  country  to  another,  even  from  one 
city  or  town  to  another.  It  is  thoroughly  characteristic 
of  the  economists  of  the  h  priori  school  to  assume 
that  such  propagation  is  instantaneous.  If  these 
writers  ever  admit  the  fact  of  "  a  period  of  readjust- 
ment," it  is  much  as  if  it  were  a  matter  of  changing 
tickets  and  baggage  at  a  railway  junction.  Prices  will 
readjust  themselves  to  the  new  supply  of  money,  be 
the  same  greater  or  smaller.  Wages  will  readjust  them- 
selves to  the  new  prices,  be  the  same  higher  or  lower. 
Industries  will  readjust  themselves  to  the  new  prices 
and  the  new  wages,  with  ease  and  celerity  and  without 
loss.  Taxes  will  diffuse  themselves  with  infallible 
equity,  whatever  the  original  subject  of  imposition. 
Readjustment  is  the  shibboleth  of  this  school.  When 
I  first  began  to  write  in  political  economy,  a  little  more 
than  twenty  years  ago,  the  economists  of  this  school 
were  still  in  authority ;  and  we  had  treatises  which,  for 
example,  assured  the  working  classes  that  it  did  not  in 
the  least  matter  whether,  at  any  given  time,  they 
received  higher  wages  or  lower  wages  or,  possibly,  any 
wages  at  all,  because,  whatever  they  might  temporarily 


AUGUSTUS    TO   COLUMBUS.  49 

lose  in  this  way,  though  it  would  at  first  go  to  the 
employing  class  in  extra  profits,  would  inevitably  be 
"  restored  to  wages"  in  the  immediate  future,  and 
so  "  the  wrong  would  tend  to  right  itself." 

Nous  avons  changt  tout  cela.  No  man  would  now 
presume  to  talk  in  this  way  before  an  intelligent  audi- 
ence. It  has  come  to  be  understood  that  social  and 
industrial  organization  and  structure  are  matters  of 
immense  importance;  that  society  and  industry  can- 
not be  reasoned  upon  as  homogeneous  and  as  in  a 
state  of  continual  flux.  It  is  acknowledged  that  the 
process  of  readjustment  is  not  easy,  and  that  its 
period  is  not  short;  that  economic  shocks  are  propa- 
gated along  the  lines  of  least  resistance ;  that  burdens 
and  taxes  tend  to  rest  upon  those  individuals  and 
classes  who  are  least  able  to  throw  them  off  upon 
others,  and  who  are,  therefore,  least  able  to  bear  these, 
themselves;  that  economic  injuries,  once  inflicted, 
tend  to  deepen  and  to  become  permanent. 

It  must  be  admitted  that,  if  ever  the  old-fashioned 
style  of  reasoning  was  applicable  to  any  subject- 
matter  in  economics,  it  was  applicable  to  the  influence 
of  alterations  in  the  money-supply  upon  prices. 
Economists,  even  the  most  reasonable,  have  been  dis- 
posed to  speak  of  this  matter  as  if  the  effects  were 
instantaneous,  or  were  produced  with  scarcely  sensible 
intervals.  That  the  economic  movement  is  more 
rapid  in  this  field  than  in  any  other,  is  due  partly  to 
the  nature  of  money,  and  partly  to  the  fact  that  the 
trading  classes,  who  are  the  chief  agents  in  the  work, 
are  a  selected  body,  active,  alert,  and  well-informed. 
Yet  Professors  Cairnes  and  Cliffe  Leslie  have  shown 


50  BIMETALLISM. 

that,  in  fact,  both  after  the  silver  discoveries  of 
America  and  after  the  gold  discoveries  of  California 
and  Australia,  the  distribution  of  the  new  money  pro- 
ceeded by  distinct  steps,  with  appreciable  intervals, 
extending  in  the  former  case  to  considerable  periods, 
periods  measured,  not  by  years,  but  by  decades.  As 
we  shall  have  occasion  to  deal  with  this  subject  again, 
I  will  not  dwell  further  upon  it  now;  but  will  proceed 
to  indicate  the  second  reason  for  the  fact  that  prices 
were  so  slow  to  respond  to  the  rapidly  increased  sup- 
plies of  money  from  the  New  World.  It  is,  as  I 
conceive  the  matter,  this.  When  we  say  that  an 
increase  of  the  money-supply,  "  other  things  equal," 
raises  prices,  we  are  likely  to  bear  in  mind  certain 
possible  changes,  as,  e.g.,  in  the  habits  of  the  people 
respecting  the  carrying  and  the  use  of  money,  in  the 
introduction  of  credit-substitutes,  etc. ;  but  we  are  not 
apt  to  bear  in  mind  that  an  increase  of  the  money- 
supply  may  itself  become  the  cause  of  an  increased 
demand;  possibly,  under  appropriate  circumstances, 
of  a  largely  increased  demand.  I  believe  that  this 
occurred  in  the  period  we  are  contemplating;  and  that 
here  is  the  explanation,  not  only  of  a  retardation  in 
the  upward  movement  of  prices,  but  also  of  the  fact 
that,  in  the  final  result,  prices  did  not  rise  propor- 
tionally to  the  increase  of  the  money-supply,  Prof. 
Ciiffe  Leslie  reaching  the  conclusion  that  a  general 
enhancement  of  prices  not  much  exceeding  200  per 
cent  followed  an  enhancement  of  the  stock  of  the 
precious  metals  estimated  at  470  per  cent,  and  even 
more.*  The  world,  down  to  that  time,  had  been 
*In  his  testimony  before  the  Herschell  Commission  (Report 


AUGUSTUS    TO   COLUMBUS.  §t 

starved,  monetarily,  ever  since  the  cessation  of  the 
money-supply ;  and  the  new  silver  was  easily  absorbed 
by  the  half- famished  system.  Moreover,  as  Prof. 
Cairnes  has  shown,  the  new  silver  and  the  rising  prices 
set  on  foot  a  host  of  industrial  and  commercial  enter- 
prises, and  wonderfully  stimulated  the  productive 
activity  of  the  whole  world.  Society,  both  industrial 
and  political,  took  on  a  new  face.  Speculation  and 
adventure  awoke  in  every  land.  The  discovery  of 
new  arts  and  of  new  resources  in  nature  made  a  call 
upon  the  new  money,  which,  with  a  larger  production, 
prevented  prices  from  rising  to  anything  like  the 
degree  in  which  the  money-supply  had  increased. 
Effects  of  a  similar  character,  but  more  extensive  in 
their  range,  followed  the  gold  discoveries  of  California 
and  Australia.  Prices  rose,  but  not  to  the  extent  to 
which  the  volume  of  money  was  increased.  The  rise 
of  prices,  itself,  stimulated  adventure  and  speculation, 
while  the  new  gold  furnished  the  necessary  means. 

The  process  by  which  a  rising  money-supply  pro- 
motes commercial  and  industrial  activity  and  enterprise 
will  be  more  fully  discussed  at  a  later  point*.  Con- 
cerning the  economic  effects  of  the  great  metallic  infla- 
tion of  1570  to  1640  or  1660,  we  may  say  that  to  this 
cause  is  attributed  by  sound  and  conservative  writers 
the  hastening  decay  of  the  obsolete  feudal  system ;  a 
decline  in  the  hereditary  revenues  of  monarchs  which, 
in  England  at  least,  contributed  greatly  to  promote 

of  1887,  No.  13,  p.  2),  Mr.  Inglis-Palgrave  estimates  the   increase 
of  supply  of  the  precious  metals,  1492-1640,  at  600  per  cent  and 
the  increase  of  prices  at  only  200. 
*  See  pp.  151-4. 


$2  BIMETALLISM. 

popular  liberties:  a  redistribution  of  wealth  which, 
while  it  worked  deep  injury  to  many  deserving  per- 
sons living  on  incomes  derived  from  the  past,  yet 
contributed  greatly  to  forward  the  material  and  intel- 
lectual progress  of  mankind ;  a  rapid  growth  of  burgher 
populations,  prompt  to  resent  the  encroachments  of 
priest,  king,  and  noble;  and  a  rising  spirit  of  self-asser- 
tion on  the  part  of  the  mechanic  and  artisan  classes. 


CHAPTER   III. 

BIMETALLISM   IN   ENGLAND,    1 666  TO    l8l6. 

THE  first  effects  of  the  Mexican  and  South  American 
discoveries  were  fully  realized  about  the  middle  of  the 
seventeenth  century,  say  1640  or  1660.  Thereafter 
the  new  supplies  sufficed  to  keep  up  the  existing  stock 
and  to  allow  a  moderate  but  continuous  expansion. 
The  period  of  tumultuous,  overwhelming,  revolution- 
ary inflation  had  passed.  We  have  spoken  of  the 
effect  upon  general  prices  of  the  increased  supply  of 
the  precious  metals,  regarded  as  a  whole.  Let  us  now 
consider  the  effects  produced  upon  the  relations  of  the 
two  metals  themselves:  upon  the  ratio  between  gold 
and  silver.  Throughout  the  early  ages  gold  seems 
(according  to  the  analysis  of  antique  coins)  to  have 
ranged  from  12,  in  silver,  up  to  12^,  13,  or  even 
more.*  Wide  local  differences  were  always  possible 

*  Soetbeer,  in  his  Materialen,  refers  to  two  standards  found  in 
the  ruins  of  the  palace  of  Khorsabad  built  by  the  Assyrian  Sar- 
gina,  or  Sargon,  in  708  B.C.  The  gold  standard  was  3/8  as  heavy 
as  the  silver  and  was  5  times  as  valuable,  hence  a  ratio  of 
I  :  i3TS«Vff-  As  Prof.  Soetbeer  remarks,  the  fixity  of  economic 
relations  in  Oriental  civilization  permits  us  to  infer  that  some- 
thing like  this  ratio  had  long  existed.  See  U.  S.  Consular  Report 
No.  87,  pp.  485  ff. 

There  has  been  preserved  a  fragment  from  Agatharchidas, 

53 


54  BIMETALLISM. 

under  the  conditions  of  life  and  trade  then  subsisting. 
It  was  entirely  conceivable,  as  Mr.  Jacob  states,  that 
gold  might  be  worth  in  Asia  no  more  than  eight  or 
nine  times  its  weight  in  silver,  while  in  Europe  it  was 
worth  ten  to  thirteen  times  as  much,  without  giving 
rise  to  any  movements  of  the  metals  which  should  be 
rapid  and  large  enough  to  correct  the  irregularity. 
As  between  European  States,  of  course,  no  such  wide 
differences  could  long  exist,  except  possibly  between 
the  Christian  and  Mahometan  parts  of  Spain. 

As  early  as  the  sixth  century,  according  to  Mr. 
Hallam,  the  Jews,  denied  participation  in  ordinary  pur- 
suits, the  victims  of  fierce  but  spasmodic  persecution, 
insecure  in  their  houses,  their  persons,  and  their  prop- 
erty, had  become  known  for  their  remarkable  talent  in 
conducting  the  operations  of  usury  and  in  effecting  the 
exchange  of  moneys.  Every  country  in  Europe  soon 
became  the  field  of  their  activity.  With  their  inevita- 
ble acids  and  scales,  for  determining  the  purity  and 
the  weight  of  coins,  they  stood  ever  ready,  even  at 
great  risks,  to  obtain  a  profit  by  the  change  of  moneys. 

which  assigns  to  gold  and  silver  an  equal  value  in  Arabia,  at  a 
certain  time.  Such  a  ratio,  though  most  remarkable,  was  not 
actually  impossible  in  a  country  which  was  in  a  high  degree 
isolated,  in  those  days  of  slow  communication  and  insufficient 
information.  If,  indeed,  the  relation  indicated  really  existed  in 
Arabia,  it  is  a  reasonable  conjecture  that  the  result  was  due  to 
the  unparalleled  scarcity  of  fuel  which  characterized  that  land, 
making  the  reduction  of  silver  ores  enormously  expensive  and 
difficult.  Yet  even  in  our  own  time  has  occurred  a  remarkable 
instance  of  a  local  ratio  widely  different  from  that  prevailing 
generally.  When,  about  the  middle  of  this  century,  Japan  was 
opened  to  commerce,  gold  was  found  rated  to  silver  in  the  coinage 
at  4 : 1. 


BIMETALLISM  IN  ENGLAND,  1666    TO    1816.        55 

In  the  thirteenth  century  the  Lombards  and  merchants 
from  the  south  of  France  began  to  swarm  over  West- 
ern Europe,  fully  as  eager  and  as  keen  to  discover  and 
to  seize  every  possible  opportunity  for  gain.  The 
heavy  coins  were  culled  out  for  melting  or  for  export, 
and  the  light  coins  were  returned  to  the  circulation ; 
while  if,  in  any  country,  either  metal  was  undervalued 
in  the  coinage — and  it  almost  invariably  happened  that 
one  or  the  other  was — the  Jew  or  the  Lombard  was 
alert  to  send  the  coins  of  that  metal  to  his  corre- 
spondents in  foreign  cities.  Under  circumstances  like 
these,  wide  differences  could  not  long  exist  between 
neighboring  countries  without  a  considerable  bullion 
movement,  though  both  the  quickness  and  the  com- 
pleteness of  these  operations  have  been  greatly  ex- 
aggerated. 

At  the  discovery  of  America,  gold  stood  to  silver 
in  the  ratio  of  about  I  to  u.  The  effects  of  the  first 
arrivals  from  the  New  World  appear  to  have  been 
slightly  in  favor  of  silver,  for  it  will  be  remembered 
that  the  treasures  seized  by  Cortez  and  Pizarro  were 
chiefly  of  gold.  But,  as  the  mining  industry  of  Mexico 
and  Peru  assumed  importance,  there  was  a  vast  pre- 
ponderance of  silver  among  the  new  supplies.  Dr. 
Soetbeer  estimates  that  between  1493  and  1520  (the 
date  of  the  invasion  of  Mexico)  the  average  yearly 
production  of  silver,  by  weight,  was  8.1  to  I  of  gold; 
that  is,  a  greater  value  of  gold  than  of  silver  was  pro- 
duced. During  the  period  1521  to  1544  (just  before 
the  discovery  of  Potosi)  the  average  annual  production 
of  silver,  by  weight,  was  12.6  to  I  of  gold;  that  is,  a 
slightly  greater  value  of  silver  was  produced.  But 


56  BIMETALLISM. 

between  1545  and  1560  the  proportion  by  weight  rose 
to  36.6  to  i,  carrying  a  value  of  three  of  silver  to 
one  of  gold;  while  between  1561  and  1580  the  pro- 
portion by  weight  rose  to  43.7  to  i ;  and  between 
1581  and  1600,  to  56.8  to  i,  carrying  a  value  of  four 
of  silver  to  one  of  gold.  It  was  not  until  after  1660 
that  the  proportion  of  silver  to  gold  by  weight  fell 
below  40:  I.  It  was  not  until  after  1700  that  it  fell 
below  30 :  I,  at  which  point  the  value  of  silver  produced 
was,  still,  two  to  one  of  gold.  During  this  long  period 
of  enormous  silver-production,  the  ratio  fell  from 
about  1 1 :  i  to  about  15:1.  A  given  quantity  of  gold 
would,  at  the  end  of  the  period,  purchase  36  per  cent, 
more  of  silver  than  at  the  beginning.  A  given  quan- 
tity of  silver  would  purchase  only  73.3  per  cent,  as 
much  gold.  Prof.  Laughlin  calls  this  a  reduction  in 
the  value  of  silver,  relatively  to  gold,  of  36  per  cent. 
I  prefer  to  say  that  silver  had  fallen  26.7  per  cent,  and, 
conversely,  that  gold  had  risen  36  .per  cent.* 

Why  was  it  that  such  an  enormously  disproportion- 
ate production  of  silver,  from  1545  to  1700,  reduced 
the  value  of  silver,  relatively  to  gold,  in  no  larger 
degree,  especially  since  the  pre-existing  stocks  of  the 
two  metals  were  so  small  ?  For  the  explanation  of 
this  result  we  are  driven  to  conjecture;  but  there  is 
one  conjecture  so  entirely  reasonable  that  we  cannot 
hesitate  to  accept  it.  We  run  no  risk  in  saying  that 

*  History  of  Bimetallism  in  the  United  States,  p.  44.  Elsewhere 
Prof.  Laughlin  speaks  of  the  increased  production  of  gold  since 
1492  as  "having  lowered  its  value  300  or  400  per  cent,  relatively 
to  other  articles."  Now,  inasmuch  as  100  per  cent,  is  all  there  is 
of  anything,  it  would  appear  that  value  cannot  be  lowered  more 
than  loo  per  cent. 


BIMETALLISM  IN  ENGLAND,  1666    TO    1816.        57 

the  chief  reason  why  a  twofold,  a  threefold,  a  four- 
fold production  of  silver,  continued  for  generations, 
and  that,  upon  pre-existing  stocks  inconsiderable  in 
comparison  with  the  new  scale  of  supply,  did  not 
reduce  the  value  of  silver,  in  terms  of  gold,  to  a  greater 
extent  was  found  in  the  fact  that  silver  was  the  metal 
which,  in  the  subsisting  conditions,  the  world  of  trade 
especially  needed ;  and,  consequently,  a  vast  propor- 
tion of  the  increased  demand  attached  itself  to  this 
metal.  Gold  had,  indeed,  three  centuries  before  the 
discovery  of  Potosi,  come  again  into  service  as  money, 
after  almost  a  millennium  of  disuse  owing  to  its  high 
cost  and  scant  supply.  It  had,  during  the  period  we 
are  contemplating,  a  real  and  important  commercial 
function  to  perform  in  banking  centres  and  in  the 
marts  of  high  commerce;  but  silver  was  still,  in  an 
overwhelming  degree,  the  world's  ordinary  money. 
There  is  reason  to  suppose  that  the  early  coinages  of 
the  yellow  metal,  in  some  of  the  countries  of  Europe, 
began  in  a  spirit  of  what,  in  these  days,  we  should 
call  advertisement.  Silver  was  more  suited  to  the 
vast  majority  of  transactions  at  home,  and  also  to 
follow  the  fleets  of  Europe,  from  continent  to  conti- 
nent, in  the  expansion  of  international  trade.  At  the 
time  we  are  speaking  of,  gold  was  increasingly  coming 
into  use,  but  not  at  a  rate  to  keep  up  with  silver. 
The  rapid  growth  of  existing  industries,  the  birth  of 
new  industries,  and  the  vast  expansion  of  trade  re- 
quired gold,  indeed,  but  required  silver  far  more 
extensively.  Consequently,  the  new  demand  attached 
itself  chiefly  to  the  white  metal,  and  thus  prevented 
a  considerable  part  of  that  fall  in  its  value  which 


58  BIMETALLISM. 

might  have  been  anticipated  from  its  disproportionate 
production. 

Meanwhile  a  change  of  vast  consequence  to  trade 
and  production  had  taken  place,  in  the  transfer  of  the 
dominion  of  commerce  and  the  seat  of  the  world's 
exchanges  from  Southern  to  Northern  Europe,  from 
Venice  to  Antwerp.  The  wonderful  career  of  the 
Queen  of  the  Adriatic,  in  arts  and  arms,  in  statecraft 
and  finance,  was  ended.  To  the  great  demands  of  the 
new  age  of  manufactures  and  trade,  her  social  and 
political  system  and  the  genius  of  her  people  were 
inadequate.  In  the  phrase  of  our  time,  Venice  could 
never  have  "  handled  the  business  "  of  the  seven- 
teenth and  eighteenth  centuries.  Neither  in  patience 
and  capacity  for  routine,  nor  in  calm  comprehension 
and  breadth  of  view,  still  less  in  the  moral  courage 
and  dauntless  resolution  required  for  the  steady  sup- 
port and  unfaltering  pursuit  of  great  and  daring  enter- 
prises in  peace  as  in  war,  could  the  sons  of  the  Medi- 
terranean compare  with  the  men  of  the  North,  on 
whom  the  management  of  the  world's  finances  and 
trade  now  devolved.  Nor  was  it  alone  in  close  calcula- 
tion, patient  industry,  and  daring  adventure  that  the 
northerner  excelled.  The  hand  of  the  Dutchman, 
the  Englishman,  the  German,  and  the  Swede  was 
strong  to  defend,  by  land  or  by  sea,  his  honest  gains 
acquired  in  factory  and  counting-house. 

Marvellous  as  were  the  developments  of  industry 
and  trade,  all  greatly  promoted  and  quickened  by  the 
floods  of  precious  metals  pouring  in  from  the  New 
World,  the  expansion  of  the  Oriental  trade  which 
resulted,  and  which,  we  may  believe,  would  have  been 


BIMETALLISM  IN  ENGLAND,  1666    TO    1816.        $9 

impossible,  or  would  have  been  long  delayed,  but  for 
the  mighty  monetary  revolution  through  which  the 
world  was  then  passing,*  forms  the  greatest  feature  of 
the  century  and  a  half  which  followed  the  conquest  of 
Peru.  And  this  remark  introduces  the  second,  though 
subordinate,  consideration  explanatory  of  the  fact  that 
silver  between  1545  and  1700  did  not  fall  more,  rela- 
tively to  gold.  The  new  trade  with  the  Orient  took 
off  no  inconsiderable  part  of  the  new  silver  from  the 
American  mines;  and  thus  diminished  the  natural 
effect  of  the  astonishing  production  upon  the  value  of 
that  metal  in  comparison  with  gold.  From  time 
immemorial,  India  has  been  a  gluttonous  consumer  of 
silver.  Of  the  remarkable  appetency  for  silver,  not 
wholly  or  mainly  for  the  purposes  of  currency,  but  for 
personal  ornaments,  for  more  or  less  meaningless 
hoards,  and  for  religious  uses,  we  shall  have  occasion  to 
speak  hereafter.  The  love  of  that  metal  in  India 
has  always  been  a  fanaticism.  For  centuries  and 
ages,  streams  of  European  and  American  silver  have 
poured  into  India,  to  be  lost  as  in  a  vast  quick- 
sand, never  returned  to  general  commerce,  not  even 
going  into  local  circulation,  but  becoming  the  hoarded 
treasure  of  a  starving  people;  the  plating  of  roofs  and 
ceilings  and  the  material  of  images  and  sacred  vessels 
of  temples  whose  thousands  of  worshippers  lived  in 
abject  misery. f  So  much  for  the  question  why  the 

*  "  It  supplied  and  rendered  possible  the  remarkable  expan- 
sion of  Oriental  trade  which  forms  the  most  striking  commer- 
cial fact  of  the  age  that  followed."  (Prof.  John  E.  Cairnes,  Es- 
says in  Political  Economy,  p.  no.) 

•j-  For  interesting  remarks  on  these  peculiar  habits  of  the  In- 


60  BIMETALLISM. 

almost  miraculous  production  of  silver,  during  the 
century  and  a  half  following  the  opening  of  the  mines 
of  Potosi  did  not  work  a  greater  change  in  the  ratio. 
The  effect  produced,  however,  was  sufficiently  pro- 
found to  disturb  every  mint  in  Europe,  whose  nations 
were  all,  as  Mr.  Shaw  phrases  it,  "  unconsciously  bi- 
metallic ";  that  is,  were  trying  to  keep  money  of 
both  metals  in  circulation  within  their  own  borders, 
without  having  any  formed  theory  regarding  the 
causes  which  determine  the  commercial  value  of  one 
metal  in  terms  of  the  other,  or  regarding  the  power  of 
government  to  influence  that  relation. 

In  reading  of  the  complaints  arising  in  every  coun- 
try, at  one  time  or  another,  concerning  the  scarcity  of 
this  kind  of  money  or  of  that,  now  of  silver,  and  now  of 
gold,  we  have  to  say  the  same  things  as  we  said  with 
regard  to  the  same  subject  prior  to  the  discovery  of 
America.  Those  complaints  have  to  be  listened  to 
with  a  degree  of  incredulity  arising  from  the  fact  that 
every  nation  in  Europe,  from  statesman  to  peasant, 
was  still  completely  under  the  domination  of  the 
theory  which  made  money  the  prime  object  of  produc- 
tion and  of  trade,  an  end  in  itself,  and  not  a  means  to 
an  end.  Consequently,  any  outflow  of  gold  or  silver 
struck  the  mind  of  the  man  of  the  sixteenth  and  seven- 
teenth centuries  as  a  national  loss,  a  sort  of  robbery, 
even  though  such  exportation  might  be  taking  place 
as  a  step  in  the  beneficent  process  of  reducing  that 
country's  stock  to  the  amount  of  its  distributive  share 


dian,  see  Soetbeer's  Materialen,  U.  S.  Cons.  Rep.  No.  87,  pp.  521 
et  seq. 


BIMETALLISM  IN  ENGLAND,   1666    TO    1816.        6l 

of  the  world's  money.  In  a  word,  the  man  of  the 
earlier  time  believed  that  his  own  country  could  not 
have  enough  of  coin;  and  he  did  not  care  whether 
other  countries  had  any  or  not.  The  instructed  man 
of  to-day  desires  that  the  world  generally  and  all  other 
countries  shall  have  a  full  circulation,  while  he  would 
like  for  his  own  country,  if  that  were  possible,  just  a 
trifle  less  than  its  distributive  share  of  that  supply,  so 
that  it  may  be  a  good  country  to  buy  in  and  not  a 
very  good  country  to  sell  to.  He  desires  to  have 
prices  everywhere  well  sustained,  in  order  that  trade 
may  be  good.  He  would  like,  if  that  were  possible, 
to  have  prices  in  his  own  country  permanently  lower, 
though  only  a  shade  lower,  than  anywhere  else,  in 
order  that  his  countrymen  may  get  the  largest  share  of 
that  trade. 

Another  reason  for  distrusting,  or  at  least  largely 
discounting,  complaints,  in  the  period  under  considera- 
tion, as  to  the  outflow  of  the  precious  metals  is  the 
same  as  that  mentioned  in  connection  with  the  period 
between  the  resumption  of  gold  coinage  at  the  middle 
of  the  thirteenth  century  and  the  great  silver  produc- 
tion at  the  middle  of  the  sixteenth  century,  namely, 
the  debasement  and  corruption  of  the  coin.  This 
cause,  however,  was  operative  in  a  reduced  degree  in 
the  later  epoch.  The  fact  that  the  precious  metals 
were  now  being  mined  in  quantities  sufficient,  not 
only  to  keep  up,  but  also  rapidly  to  increase  the 
stock,  largely  diminished  the  temptation  to  kings  to 
become,  as  Prof.  Rogers  terms  it,  "  smashers  in  their 
own  mints  and  swindlers  of  their  own  people."  In- 
deed, we  cannot  help  making  a  sort  of  excuse  for  the 


62  B IME  TA  LLISM. 

blackguardly  conduct  of  princes  and  coining  authori- 
ties in  the  later  middle  ages,  when  we  consider  the 
small  amount  of  pure  metal  in  existence.  It  is  even 
possible  that,  if  allowance  be  made  for  the  readiness 
of  poor  human  nature  to  deceive  itself  under  the 
stress  of  self-interest,  some  of  the  worst  offenders  be- 
lieved that  they  were  doing  their  subjects  a  service 
by  spreading  out  the  mass  of  metal  at  their  command 
into  a  greater  body  of  coins.  When  one  remembers 
how  prone  American  communities  at  the  West,  in  the 
early  half  of  this  century,  were  to  look  upon  bankers 
who  manufactured  a  hundred  thousand  dollars  of 
notes  upon  a  reserve  of  a  thousand,  and  from  that 
down  to  nothing,  in  specie,  as  public  benefactors, 
and  how  prompt  they  were  to  resent  every  legisla- 
tive attempt  to  impose  stringent  conditions,  he  may 
imagine  John  the  Good,  of  France,  after  some  pecul- 
iarly flagitious  act  of  corrupting  the  coin,  rubbing  his 
hands  in  benevolent  and  patriotic  fervor,  and  saying 
under  his  breath,  "  Ah,  this  will  help  trade!" 

Again,  no  inconsiderable  part  of  the  inconvenience 
and  disorder  charged  against  the  bimetallic  system  in 
the  time  of  which  we  are  speaking  was  occasioned  by 
the  failure  to  place  fractional  silver  on  a  separate 
basis.  This  should  have  been  done;  could  have  been 
done  just  as  easily  under  a  bimetallic  system  as  under 
monometallism ;  that  it  was  not  in  all  cases  done  is  to 
be  charged  simply  to  ignorance.  Whenever  this  over- 
sight was  remedied,  some  important  part,  perhaps 
the  whole,  of  the  public  inconvenience  complained  of 
ceased.  This  point,  about  which  there  is  universal 
agreement  at  the  present  time,  was  not  understood  at 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.       63 

all  in  the  earlier  time;  and  an  almost  inconceivable 
amount  of  confusion  was  created  thereby.  Even 
where  the  principle  of  issuing  fractional  money  at  a 
value  below  that  in  which  the  pieces  nominally  stand 
in  relation  to  the  principal  coin  is  fully  admitted,  and 
treasury  and  mint  officials  do  all  in  their  power  to 
maintain  an  adequate  supply,  it  will  often  happen 
that  "change  "  becomes  scarce.  In  an  age  when  the 
principle  was  not  even  conceived  of,  the  outcry  on 
this  account  would  be  far  more  frequent  and  noisy. 
Beyond  doubt,  we  must  attribute  to  this  a  large  share 
of  the  complaints  which  have  been  accepted  as  prov- 
ing the  necessarily  mischievous  effects  of  a  bimetallic 
system.  In  the  French  law  of  1803  this  very  mistake 
was  made;  the  smaller  silver  coins,  the  two-franc  and 
the  one-franc  pieces,  the  pieces  of  50  centimes  and 
even  those  of  25*  centimes  (5  cents)  were  issued  from 
the  mint  of  the  same  fineness — namely,  nine-tenths 
— as  the  five-franc  pieces.  These  small  coins  were 
gathered  up  and  exported  whenever  the  natural  move- 
ment of  silver  began,  with  the  inevitable  result  of 
serious  public  inconvenience  and  great  popular  out- 
cry. It  was  not  until  1864  that  the  law  was  altered, 
so  that  all  silver  coins  below  five-franc  pieces  were 
coined  at  835  fine,  instead  of  900,  per  1000.  In 
the  same  way,  in  the  United  States,  from  the  begin- 
ning, two  "halves"  or  four  "quarters  "  or  ten  dimes 
or  twenty  half-dimes  had  been  equal  to  one  dollar, 
in  the  amount  of  pure  metal  contained.  It  was  not 
until  1853  that  the  subsidiary  silver  coin  was  reduced 

*  20  centimes  after  1848. 


64  BIMETALLISM. 

in  value,  and  it  was  provided  that  the  minting  of 
these  coins  should  be  at  the  instance  of  the  treasury, 
and  not  of  private  holders  of  bullion. 

Yet,  in  spite  of  all  these  reasons  for  distrusting 
complaints  of  the  outflow  of  specie,  in  any  time  long 
past,  we  cannot  question  that  monetary  disturbances 
due  to  variations  in  the  relative  value  of  the  metals 
were  very  great  after  the  discovery  of  America. 
While. the  silver-price  of  gold  was  rising  from  1 1  to  I 
to  15  to  i,  it  must  have  been  that,  in  every  country 
where  a  mint-ratio  existed  favorable  to  silver  in  any- 
thing like  the  old  degree,  the  undervalued  gold  would, 
more  or  less  rapidly,  in  spite  of  public  odium,  of 
royal  proclamations,  and  of  penalties  meted  out  in  the 
most  brutal  spirit,  seek  a  better  market.  The  frantic 
and  largely  futile  efforts  of  kings  and  parliaments,  in 
that  age,  to  affect  the  natural  operation  of  the  prin- 
ciple of  self-interest  in  dealing  with  the  coin,  justify 
no  inferences  against  the  practicability  of  a  true  in- 
ternational bimetallism.  Those  efforts  were  individ- 
ualistic, selfish,  antagonistic,  designed  to  benefit  the 
nations  making  them  at  the  expense  of  others.  The 
very  idea  of  a  common,  ecumenical  interest  in  an 
ample,  sufficient,  stable  currency  for  the  whole  world, 
in  which  every  country  should  participate  according 
to  its  own  needs  in  the  matter  of  circulation,  and  in 
which  an  excess  of  local  supply  was  a  matter,  not  to 
be  rejoiced  in,  but  to  be  deprecated,  had  never  been 
conceived  of.  The  results  of  the  efforts  of  all  nations 
to  seize  and  hold  the  most  they  could  of  the  precious 
metals,  each  pulling  against  the  others,  instead  of  all 
acting  together  for  a  common  good,  no  more  prove  that 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.       65 

the  united  strength  of  the  principal  commercial  powers 
could  not  set  up  and  maintain  a  real  and  reasonably 
permanent  bimetallism  than  the  succession  of  usurpa- 
tions, debaucheries,  and  assassinations  in  a  certain 
period  of  the  Roman  Empire  prove  that  a  Christian 
nation  cannot  maintain  a  peaceful  government  from 
generation  to  generation  under  a  dynasty  respected 
and  beloved. 

For  our  present  purposes,  we  may  let  pass,  without 
detailed  description,  the  period  between  the  middle 
of  the  sixteenth  and  near  the  close  of  the  seven- 
teenth century.  It  was  a  matter  of  course  that, 
with  the  prevailing  policy  of  that  age,  every  nation 
sought  its  own  interest  through  means  which  involved, 
and  were  intended  to  involve,  a  loss  or  injury  to  others. 
It  was  a  matter  of  course  that  the  prevailing  belief  in 
the  mercantile  system  dictated  to  each  nation  an 
effort  to  obtain  and  retain  the  precious  metals  at  the 
expense  of  its  neighbors.  It  was  a  matter  of  course 
that  in  such  a  struggle  for  "the  coverlid  of  gold,"  to 
use  a  modern  expression,  the  selfish,  individualistic, 
antagonistic  efforts  of  the  nations  produced  general 
confusion  and  resulted  in  disappointment  and  failure. 
But  near  the  close  of  the  seventeenth  century  the 
turmoil  which  the  rapid  fluctuations  in  the  relative 
value  of  gold  and  silver  had  created  greatly  subsided. 
Silver  reached  the  position  which  it  was  to  occupy 
for  a  long  time  to  come.  The  ratio  definitively 
changed  from  about  1 1 :  I  to  about  15:1. 

Indeed,  the  latter  ratio  came  in  rather  nearer  the 
middle  than  the  end  of  the  century,  say  1660.  Let 
us,  then,  fix  our  attention  on  this  period.  Let  us,  also, 


66  BIME  TA  LLISM. 

direct  our  observation  to  a  single  nation,  England, 
both  because  of  the  important  role  which  she  was 
destined  later  to  perform  in  the  development  of  the 
world's  monetary  system,  and  because,  at  this  partic- 
ular time,  what  was  said  and  done  in  that  "  tight  little 
isle  "  constitutes  one  of  the  most  instructive  chapters 
of  monetary  history.  England  under  the  Tudors  and 
during  the  first  half  of  the  Stuart  regime  was  no 
better  and  no  worse,  in  the  respects  of  stupidity 
and  selfishness  in  dealing  with  the  question  of  money, 
than  were  her  allies  or  her  enemies  on  the  Continent. 
But  before  the  close  of  the  seventeenth  century  her 
monetary  literature  was  to  be  enriched  by  the  contri- 
butions of  some  of  the  most  exalted  minds  known  to 
fame;  and  her  monetary  legislation,  if  still  imperfect 
in  its  theory  and  unsatisfactory  in  its  results,  was  to 
show  the  influence  of  advanced  ideas,  and  of  sentiments 
largely  emancipated  from  the  narrowness  and  bigotry 
of  the  past  ages.  The  statesmen  and  the  philosophers 
of  William  III.,  Somers  and  Montague,  Locke  and 
Newton,  constitute  one  of  the  noblest  groups,  tak- 
ing character,  intelligence,  and  aspiration  together,  to 
be  found  in  human  history.  In  1666,  an  act  known 
as  the  1 8th  of  Charles  II.,  chap.  5,  opened  the  mint  to 
coinage  of  both  metals  gratuitously,  that  is,  without 
seigniorage  charge.  The  weight  of  the  guinea  had 
been  fixed  by  the  indenture  of  1663  at  2/89  of  a 
pound  troy  of  gold ;  and  the  value  at  20  shillings  in 
silver.  The  long  course  of  corruption  and  debasement 
of  the  coins  of  the  realm,  under  the  Tudors,  and  espe- 
cially under  Henry  VIII.  and  the  Protector  Somerset, 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.       67 

was  at    an   end;    thereafter  the    monetary  policy  of 
England  was  scrupulously  honest. 

The  act  of  1666  cannot,  at  the  time  of  its  enactment 
or  until  the  great  Recoinage,  be  taken  seriously  as  an 
effort  at  national  bimetallism.  First,  as  Lord  Farrer 
states,  it  was  the  policy  of  the  government  to  treat 
gold  as  subsidiary  to  silver,*  and  to  leave  the  guinea 
to  find  its  own  value  in  silver  money.  The  mint-rate 
was  not  acted  on  or  enforced.  Secondly,  irrespective 
of  the  attitude  of  the  government,  the  actual  status  of 
the  coinage  forbade  anything  like  a  fair  trial  of  the 
system.  Although  debasement  at  the  mint  had 
ceased,  the  inheritance  from  preceding  administrations 
and  the  unremitting  labors  of  clippers  and  sweaters 
had  reduced  the  body  of  coins  in  circulation  to  a  con- 
dition of  frightful  disorder.  The  new  guineas  were 
worth  more  than  the  shillings  at  which  they  were  rated 
in  any  shillings  to  be  found  afloat.  Consequently, 
the  guineas  of  gold  and  the  worn  and  corrupted 
shillings  of  silver  alike  supplanted  in  the  circulation 
all  shillings  which  approached  the  true  value.  Gold 
came  in  from  the  countries  across  the  Channel,  and 
the  full-weighted  silver  went  out  of  the  kingdom. 
The  government  shrank  from  recoinage  at  the  cost  of 
individual  holders,  as  a  measure  of  intolerable  tyranny; 
the  state  of  the  Treasury  would  not  allow  recoinage  at 
the  cost  of  the  State.  The  longer  the  remedy  was 
postponed,  the  greater  the  evil  grew.  At  last  a  con- 
dition was  reached  when  the  most  terrible  penalties  of 
a  barbarous  age  were  almost  without  effect.  Hanging, 

*  "  The  rating  money,  so  to  speak,  was  silver  ;  the  rated  money 
was  gold."  (Horton's  The  Silver  Pound,  p.  73.) 


68  BIMETALLISM. 

even  burning  alive,  scarcely  checked  the  progress  of  the 
passion.  A  sort  of  madness  fell  upon  the  people.  Men, 
women,  and  children  joined  in  counterfeiting,  clipping, 
and  sweating  the  coin ;  and  those  who,  from  lack  of 
handicraft  or  of  mental  initiative,  took  no  part  in  the 
crime,  sympathized  with  and  cheered  the  criminals  as 
they  were  drawn  to  the  scaffold  or  the  stake.  Of  the 
state  of  things  in  England  resulting  from  the  corrup- 
tion of  the  coin,  Macaulay,  in  his  famous  XXI.  Chap- 
ter, says: 

"  In  the  autumn  of  1695  it  could  hardly  be  said  that  the 
country  possessed,  for  practical  purposes,  any  measure  of  the 
value  of  commodities.  It  was  a  mere  chance  whether  what  was 
called  a  shilling  was  really  tenpence,  sixpence,  or  a  groat.  The 
results  of  some  experiments  which  were  tried  at  that  time  de- 
serve to  be  mentioned.*  The  officers  of  the  exchequer  weighed 
fifty-seven  thousand  two  hundred  pounds  of  hammered  money 
which  had  recently  been  paid  in.  The  weight  ought  to  have 
been  above  two  hundred  and  twenty  thousand  ounces.  It 
proved  to  be  under  one  hundred  and  fourteen  thousand  ounces. 
Three  eminent  London  goldsmiths  were  invited  to  send  a  hun- 
dred pounds  each  in  current  silver  to  be  tried  by  the  balance. 
Three  hundred  pounds  ought  to  have  weighed  about  twelve 
hundred  ounces.  The  actual  weight  proved  to  be  six  hundred 
and  twenty-four  ounces.  The  same  tests  were  applied  in 
various  parts  of  the  kingdom.  It  was  found  that  a  hundred 
pounds,  which  should  have  weighed  about  four  hundred  ounces, 
did  actually  weigh  at  Bristol  two  hundred  and  forty  ounces,  at 
Cambridge  two  hundred  and  three,  at  Exeter  one  hundred  and 
eighty,  and  at  Oxford  only  one  hundred  and  sixteen. 

*  "  According  to  the  accounts  of  Neale,  then  master  and  war- 
den of  the  Mint,  4,695,303  dwt.  15  oz.  2  grs.  of  the  clipped  silver 
money  produced  only  790,860  Ibs.  i  oz.  19  grs.,  implying  a  depre- 
ciation in  weight  alone  of  over  47.75  per  cent."  (Shaw's  History 
of  Currency,  224.) 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.       69 

"  The  evil  was  felt  daily  and  hourly  in  almost  every  place 
and  by  almost  every  class,  in  the  dairy  and  on  the  threshing- 
floor,  by  the  anvil  and  by  the  loom,  on  the  billows  of  the  ocean 
and  in  the  depths  of  the  mine.  Nothing  could  be  purchased 
without  a  dispute.  Over  every  counter  there  was  wrangling 
from  morning  to  night.  The  workman  and  his  employer  had 
a  quarrel  as  regularly  as  the  Saturday  came  round.  On  a  fair- 
day  or  a  market-day  the  clamors,  the  reproaches,  the  taunts, 
the  curses,  were  incessant :  and  it  was  well  if  no  booth  was 
overturned  and  no  head  broken.  No  merchant  would  contract 
to  deliver  goods  without  making  some  stipulation  about  the 
quality  of  the  coin  in  which  he  was  to  be  paid.  Even  men  of 
business  were  often  bewildered  by  the  confusion  into  which  all 
pecuniary  transactions  were  thrown.  The  simple  and  the  care- 
less were  pillaged  without  mercy  by  extortioners  whose  de- 
mands grew  even  more  rapidly  than  the  money  shrank." 

At  last,  in  1696,  the  increasing  urgency  of  the  case 
united  with  the  influence  and  authority  of  the  states- 
men and  philosophers  we  have  named  to  secure  the 
general  recoinage  of  silver;  and  that,  both  according 
to  the  ancient  standard  and  at  the  public  expense. 
The  debate  on  these  two  points  had  been  carried  on 
with  singular  power.  Never  before,  in  England,  had 
such  men  taken  part  in  the  discussion  of  monetary 
problems.  Lowndes,  Secretary  of  the  Treasury, 
appeared  as  the  champion  of  the  scheme  to  put  out 
the  new  coin  at  something  like  an  average  of  the  exist- 
ing coins.  He  proposed  to  coin  the  pound  of  standard 
silver  into  77  shillings,  in  place  of  62,  effecting,  thus, 
a  reduction  of  nearly  one-quarter.  He  argued  that 
the  debasement  had  been  long  in  progress;  that  prices 
had  adapted  themselves,  painfully  and  inadequately, 
indeed,  to  the  state  of  the  coin;  that  contracts  for 
goods,  for  rents,  for  interest,  had  been  based  on  exist- 


70  B I  ME  TA  LLISM. 

ing  prices;  and  that  an  abrupt  return  to  the  former 
measure  would  work  injustice  to  debtors  and  would 
occasion  an  unnecessary  disturbance  to  production  and 
trade.  John  Locke  stood  as  the  champion  of  "the 
ancient  right  standard."  Of  the  writings  of  the  great 
philosopher  on  this  occasion,  Macaulay  remarks:  "  It 
may  well  be  doubted  whether  in  any  of  his  writings, 
even  in  those  ingenious  and  deeply  meditated  chapters 
on  language  which  form,  perhaps,  the  most  valuable 
part  of  his  Essay  on  the  Human  Understanding,  the 
force  of  his  mind  appears  more  conspicuously."  The 
highly  honorable  decision  to  maintain  the  standard 
introduced  another  question  which  has  not  been  of 
equal  philosophical  interest,  but  which  was  of  immense 
practical  importance.  Who  should  bear  the  loss?  In 
the  coinage  of  1559,  in  Queen  Elizabeth's  time,  the 
loss  from  abrasion,  clipping,  and  sweating  had  been 
thrown  upon  the  innocent  actual  holders  of  the  coin ; 
and  government  had  even  realized  some  small  profit 
by  the  transaction.  In  the  recoinage  of  King  William, 
the  Treasury  assumed  the  cost,  which  was  clearly  just, 
since  the  money  had  been  worn  during  public  use. 
The  expense  of  the  great  work  was  nearly  three  mill- 
ions sterling.  When  it  is  remembered  that  this  was 
one  and  a  half  times  the  ordinary  revenue  of  the 
kingdom,  the  magnitude  of  the  undertaking  will  be 
appreciated. 

The  debate  over  the  recoinage  of  1696,  and  over  the 
rating  of  gold  which  followed,  is  of  the  deepest  interest 
to  the  student  of  money.  Just  how  that  debate  stands 
related  to  the  issue  of  bimetallism  or  monometallism 
has  been  the  theme  of  active  discussion.  Mr.  Horton 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.        /I 

in  his  learned  treatise,  "  The  Silver  Pound,"  claims 
both  Locke  and  Newton  as  bimetallists.  Indeed,  he 
styles  the  latter  the  father  of  modern  bimetallism; 
although  it  is  admitted  that,  during  the  debate  over 
the  coinage,  he  spoke  rather  as  an  officer  of  the  mint 
than  as  an  economist.  Prof.  Jevons,  in  his  ' '  Investiga- 
tions in  Currency  and  Finance,"  edited  after  his  death 
by  Prof.  Foxwell,  makes  a  strong  case  against  this 
characterization,  especially  by  introducing  the  pam- 
phlet of  John  Conduitt,  the  husband  of  Sir  Isaac's 
niece,  which,  he  thinks,  may  fairly  be  regarded  as 
representing  the  general  views  of  the  great  scientist. 
The  following  is  the  passage  which  is  relied  upon  to 
prove  Newton  a  bimetallist: 

"  If  Gold  in  England,  or  Silver  in  East  India,  could  be  brought 
down  so  low  as  to  bear  the  same  Proportion  to  one  another  in 
both  Places,  there  would  be  here  no  greater  Demand  for  Silver 
than  for  Gold  to  be  exported  to  India ;  and  if  Gold  were  low- 
ered only  so  as  to  have  the  same  Proportion  to  the  Silver 
Money  in  England  which  it  hath  to  Silver  in  the  rest  of  Eu- 
rope, there  would  be  no  Temptation  to  export  Silver  rather  than 
Gold  to  any  other  part  of  Europe.  AND  TO  COMPASS  THIS 
LAST  there  SEEMS  NOTHING  MORE  REQUISITE  THAN  TO  TAKE 
OFF  ABOUT  IOD.  OR  I2D.  FROM  THE  GUINEA,  so  that  Gold  may 
bear  the  same  Proportion  to  the  Silver  Money  in  England 
which  it  ought  to  do  by  the  Course  of  Trade  and  Exchange  in 
Europe." 

These  words  occur  in  the  course  of  an  argument  for 
the  re-rating  of  the  metals ;  and  they  seem  fairly  to 
bear  the  construction  given  to  them.  Locke  discussed 
the  economic  elements  of  the  case  freely,  and  has  left 
more  material  for  controversy.  The  sentence  which 
the  monometallists  quote  on  their  side  is  one  which 


72  BIMETALLISM. 

occurs  in  his  Report  of  1698,  on  the  re-rating  of  gold. 
It  is  as  follows: 

"It  being  impossible  that  more  than  one  Metal  should  be 
the  true  Measure  of  Commerce;  and  the  world  by  common  Con- 
sent and  Convenience,  having  settled  that  Measure  in  Silver; 
Gold  as  well  as  other  Metals,  is  to  be  looked  upon  as  a  Com- 
modity, which  varying  in  its  Price  as  other  Commodities  do, 
its  Value  will  always  be  changeable ;  and  the  fixing  of  its 
value  in  any  Country;  so  that  it  cannot  be  readily  accommo- 
dated to  the  course  it  has  in  other  neighbouring  Countries,  will 
be  always  prejudicial  to  the  Country  which  does  it." 

This  remark  has  often  been  quoted  as  showing  that 
Locke  was  a  silver-monometallist.  But  Mr.  Horton 
offers  considerations  of  great  force  in  opposition  to 
this  view.  His  argument,  in  brief,  is  this:  First,  the 
monetary  system  of  England  at  that  time  was  bi- 
metallic, not,  indeed,  in  the  modern  form,  but  with 
silver  as  the  standard,  and  gold  rated  to  it  by  law  or 
proclamation.  Of  this  Mr.  Horton  says: 

"  The  scheme  is  precisely  what  I  should  advocate,  under 
conditions  such  as  those  which  obtained  two  centuries  ago.  It 
appears  to  me,  in  a  word,  the  plain  common-sense  of  what  I 
may  call  a  Local-National  Bimetallic  System.  The  Unit  being 
held  by  the  heavier,  the  more  abundant,  and  the  steadier  metal 
and  full  provision  made  for  duly  holding  the  other  metal  in  har- 
ness as  Money,  at  par  with  the  Unit,  the  system  was,  in  my  view, 
arranged  with  full  adaptation  to  the  international  elements  of  the 
problem,  as  they  then  stood.  I  do  not  hesitate  to  affirm  that  it 
is  distinctly  the  analogue,  for  that  day,  of  the  Union  for  Free 
Coinage  of  Silver  and  Gold,  the  adoption  of  which  was  put 
upon  the  order  of  the  day  before  Christendom  by  the  Monetary 
Conference  of  1878."  (The  Silver  Pound,  p.  in.) 

That  system,  Mr.  Horton  declares,  was  not  a  vision- 
ary one.  "  France,"  he  says,  "  actually  enjoyed  its 


BIMETALLISM  IN  ENGLAND,   1666    TO    1816.        73 

Double  Standard,  in  the  sense  of  a  concurrent  circula- 
tion of  the  two  metals,  throughout  the  greater  part  of 
the  eighteenth  century;"  and  for  proof  of  this  he 
refers  to  his  appendix,  to  the  Report  of  the  Inter- 
national Monetary  Conference  of  1878.  That  system 
Locke  sustained,  supported,  approved  ;*  and  he  was, 
thus,  a  bimetallist  of  that  time — a  bimetallist,  so  far 
as  the  theory  of  bimetallism  had  then  developed. 

Secondly,  it  is  Mr.  Horton's  view  that  the  perver- 
sion of  Locke's  views,  as  he  esteems  it,  grew  "  out  of 
the  disposition  to  apply  the  controversial  terms  of 
to-day  to  a  state  of  things  quite  remote  and  disparate 
from  that  which  has  produced  them."  (The  Silver 
Pound,  p.  90.) 

Thirdly,  Mr.  Horton  explains  any  seeming  incom- 
patibility between  Locke's  expresions,  as  quoted,  and 
a  cordial  acceptance  of  bimetallism,  as  then  under- 
stood, by  the  fact  that  he  was  in  the  situation  of  an 
advocate,  strenuously  opposing  the  debasement  of  the 
coinage  and  urging  the  maintenance  of  the  Ancient 
Right  Standard.  "An  effort  was  on  foot,  and  near 
success,  to  engage  the  statesmen  of  the  Whig  Revo- 
lution in  the  career  of  debasement  of  Money  which 
had  been  a  blot  upon  earlier  ages  and  upon  former 
reigns.  Against  this  Locke  set  his  face;  and  any 
little  overstatement  he  may  have  made  is  surely 
rather  a.  credit  to  his  temper  than  a  reproach  to  his 
reason."  (The  Silver  Pound,  pp.  79-82.) 

Finally,  Mr.  Horton,  very  effectively,  as  it  appears 

*  Except  in  the  writings  of  the  earliest  of  the  three  periods 
into  which  Mr.  Horton  divides  Locke's  public  activity.  (The 
Silver  Pound,  p.  76.) 


74  BIMETALLISM. 

to  me,  turns  the  expression  in  controversy  against 
those  who  have  given  it  a  monometallist  bearing, 
asserting  that  Locke's  objection  to  fixing  the  value  of 
gold  in  any  country,  "so  that  it  cannot  be  readily 
accommodated  to  the  course  it  has  in  other  neighboring 
countries,"  is  an  argument,  not  for  leaving  gold  to  be 
mere  merchandise,  taking  its  place  in  contracts  accord- 
ing to  the  will  of  the  individual  bargainers  at  the  time ; 
but  for  periodically  fixing  the  value  of  gold  relatively 
to  silver,  by  law  or  proclamation,  from  time  to  time, 
according  to  the  general  course  of  the  metals,  in  order 
that  both  may  at  once  be  money,  passing  in  circula- 
tion at  a  ratio.  This  view,  which  certainly  accords 
better  with  the  text  than  the  other  construction  given 
to  it,  is  corroborated  by  the  fact  that  the  language 
cited  occurs  in  a  report  in  which  Locke  urges  the 
reduction  of  the  guinea  to  2  I  shillings  6  pence.  It 
is  the  fixing  of  the  ratio  so  that  it  cannot  be  accom- 
modated to  the  course  the  two  metals  have  elsewhere, 
not  the  fixing  of  the  ratio  at  all,  to  which  Locke 
makes  objection.  It  is,  however,  of  much  less  conse- 
quence whether  we  believe  that  Newton  and  Locke 
were  bimetallists  in  their  day,  than  whether  we  believe 
they  would  be  bimetallists  in  an  age  when  interna- 
tionalism has  made  great  progress,  alike  in  theory 
and  in  practice;  when  leagues  and  conventions  for 
the  world-wide  performance  of  certain  functions,  the 
world-wide  maintenance  of  certain  conditions  requir- 
ing to  be  defended  by  a  general  agreement,  the  world- 
wide enforcement  of  certain  rights  and  property 
interests,  have  made  that  idea  familiar  to  all  civilized 
peoples;  and,  especially,  when  the  vicious  views  of 


BIMETALLISM  IN  ENGLAND,   1666    TO    1816.        75 

money  which  once  prevailed  in  all  countries  have  been 
supplanted  by  universally  accepted  principles  of 
finance,  in  which  the  general  monetary  system  of  the 
commercial  world  is  recognized  as  of  scarcely  less  im- 
portance to  each  nation,  in  turn,  than  is  the  integrity 
of  its  own  circulation.  As  the  question  whether 
Newton  and  Locke  would  be  bimetallists  in  our  time 
is  one  regarding  which  all  men  have  a  natural  and 
inalienable  right  to  their  private  opinions,  I  shall  not 
pursue  the  subject  further. 

The  recoinage  of  silver,  in  1696,  removed  what 
had  been  the  chief  obstacle  to  a  fair  trial  of  national 
bimetallism  in  England,  namely,  the  general  corruption 
of  the  circulating  coin.  But  another  cause  of  mischief 
was  permitted  to  operate,  though  perfectly  remediable, 
which  sufficed  to  prevent  the  success  of  the  system. 
Gold  was  distinctly  overvalued  in  the  circulation. 
During  the  time  of  the  greatest  disorder  of  the  coin, 
the  guinea  had  exchanged  for  as  high  as  thirty  shil- 
lings, such  as  shillings  then  were.  In  the  year  of  the 
recoinage,  the  maximum  silver  price  of  the  guinea  was 
reduced  by  statute  to  26  shillings;  and  this  was  later 
in  the  same  year  brought  down  to  22  shillings.  But 
still  gold  remained  overvalued.  The  mint  regulations 
of  Holland  and  France  were  less  favorable  to  gold,  more 
favorable  to  silver.  Consequently,  those  countries 
drew  away  England's  fine,  brand-new  silver  coin.  As 
early  as  1698,  only  two  years  after  the  recoinage, 
Locke,  in  a  report  *  which  was  a  few  years  ago  dis- 

*  Signed  by  three  other  members  of  the  Council  of  Trade  and 
Plantations,  besides  himself.  (Morton,  The.  Silver  Pound,  p. 
77-) 


76  BIME  TA  LLISM. 

covered  by  Mr.  Horton's  researches,  proposed  that 
the  guinea  should  be  reduced  to  21  shillings  6d.  "  at 
least  " ;  with  the  additional  suggestion  that  "  if,  con- 
trary to  our  expectation,  this  abatement  should  prove 
too  small,  guineas  may  by  the  same  easy  means  be 
lowered  yet  further,  according  as  may  be  found  expe- 
dient." Such  a  reduction  had  been  ordered  by  the 
Lords  Commissioners  of  the  Treasury  in  1697 ;  but  the 
order  was  rescinded.  The  recommendation  of  Locke 
and  his  associates,  in  1698,  was  immediately  given 
effect ;  and  the  guinea  was  definitively  reduced  to  2 1 
shillings  6d. ;  but  even  this  still  left  gold  overrated, 
as  compared  with  that  metal  in  the  countries  across 
the  Channel;  and  gold  continued  to  flow  into  the 
Kingdom,  in  part  to  reinforce  the  circulation,  in  part 
to  replace  the  silver  coin.  It  was,  at  any  time,  within 
the  power  of  the  Government  to  reduce  the  force  of 
this  movement  or  to  put  a  stop  to  it  altogether;  but 
the  authorities  were  not  brought  to  the  point  of  action 
until  the  famous  report  of  Newton  in  1717.  Newton 
had  for  years  been  an  advocate  of  the  reduction  of  the 
guinea.  In  three  several  reports,  in  1701  and  1702, 
he  had  recommended  this  course.  In  his  report  of 
1717  occurs  a  paragraph  which  strikingly  illustrates 
the  proposition  advanced  in  the  last  chapter,  regarding 
the  time  taken  to  effect  changes  in  the  currency,  which 
the  monometallist  writers  so  commonly  treat  of  as 
practically  instantaneous.  He  says:  "  People  are 
already  backward  to  give  Silver  for  Gold,  and  will  in 
a  little  time  refuse  to  make  payment  in  Silver  without 
a  Premium."  Here  was  a  case  where  gold  had  been 
overrated  for  many  years,  indeed  ever  since  the  re- 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.       77 

coinage  of  1696.  At  the  very  moment  of  this  report 
Newton  speaks  of  the  profit  of  sending  away  silver 
rather  than  gold  as  "almost  four  per  cent" ;  and  yet, 
through  all  this  time,  silver  had  continued  to  circulate 
and  to  be  given  for  gold. 

The  report  of  1717*  is  that  from  which  we  have 
already  quoted  Newton's  words  regarding  the  policy 
of  adapting  the  rating  of  gold  to  meet  the  facts  of 
foreign  markets.  So  strong  were  the  arguments  then 
advanced  that  the  guinea  was,  by  proclamation  of 
Dec.  22,  1717,  reduced  to  21  shillings,  while  "  broad 
pieces"  were  brought  down  to  2$  and  23  shillings. 
The  proclamation  continues  in  these  words:  "At 
which  rates  and  values  we  do  hereby  declare  the  said 
respective  pieces  of  coined  gold  to  be  current."  It 
was  too  late.  For  twenty  years  England  had  allowed 
herself  to  be  drained  of  her  silver,  through  the  over- 
rating of  gold ;  and  when  the  remedy  so  often  recom- 
mended was  at  last  applied,  not  only  was  her  power 
to  influence  the  value  of  gold,  by  offering  silver  in  its 
stead,  largely  exhausted;  but  gold  had,  itself,  through 
independent  causes,  already  sunk  to  a  still  lower  level 
in  value  so  that  the  reduction  which  alone  could  have 
checked  the  drain  of  silver,  would  have  been  to  some- 
thing less  than  2 1  shillings.  But  the  rulers  of  England 
were  timid;  and  her  merchants,  who  influenced  their 
action,  were  short-sighted.  Moreover,  it  should,  in 

*  "  It  was  not  till  the  order  of  1717,  issued  on  the  advice  of  Sir 
Isaac  Newton,  that  a  minimum  as  well  as  a  maximum  value  was 
placed  on  it  [silver]  and  that  the  guinea  was  actually  rated  at  a 
fixed  amount."  (Lord  Farrer,  Gold  Standard  Defence  Associa- 
tion: Tract  No.  8,  p.  9.) 


78  BIMETALLISM. 

fairness,  be  said  that  it  was  natural  that  gold  should 
come  to  take  a  larger  and  still  larger  place  in  the  cir- 
culation of  the  Kingdom.  When  the  Act  of  1666  was 
passed,  the  amount  of  gold  in  the  hands  of  men  was 
small.  From  that  date  onward,  the  annual  produc- 
tion rapidly  increased,  until  it  reached  double  its 
former  amount.  Unquestionably,  trade  was  all  the 
time  attaining  conditions  which  made  a  larger  use  of 
gold  convenient  and  desirable;  and  unquestionably, 
also,  England  was  the  country,  of  all  the  world,  whose 
business  justified  the  largest  use  of  it.  Much  of 
the  new  supplies  doubtless  had  the  double  effect  to 
re-enforce  the  aggregate  money  of  the  kingdom  and 
to  effect  a  beneficial  change  in  the  proportion  of  the 
two  constituents.  Yet  gold  would  have  come  into 
England  to  the  full  exent  which  trade  required,  had 
the  guinea  been  accurately  rated ;  while,  with  a  truer 
rating,  the  silver  would  not  have  gone  out,  as  it  un- 
questionably did  to  an  injurious  degree.  "  There 
was,"  says  Lord  Farrer,  "  throughout  the  last  cen- 
tury and  down  to  1816,  a  great  dearth  of  silver  coin  in 
this  country." 

Soon  a  new  cause  appeared  to  facilitate  the  progress 
of  England  towards  a  predominant  gold  circulation. 
The  mines  of  Brazil  were  discovered  about  the  middle 
of  the  eighteenth  century,  still  further  reducing  the 
value  of  that  metal  in  relation  to  silver,  and  still  further 
promoting,  in  the  absence  of  a  new  rating,  the  outflow 
of  silver.  A  little  later,  the  state  of  the  gold  coin 
became  the  subject  of  anxious  consideration,  as  that 
of  the  silver  coin  had  been  in  the  years  preceding 
1696.  In  1774,  a  general  recoinage  of  gold  took 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.       79 

place;  and  at  the  same  time  an  act  was  passed  pro- 
viding that  silver  should  be  legal  tender  for  sums 
above  £2$,  not  by  "  tale,"  or  count,  but  according  to 
its  actual  fine-metal  contents.  Although  silver  coin  still 
continued  to  be  legal  tender  by  weight,  some  writers- 
have  been  disposed  to  treat  this  act  as  practically  a 
measure  for  the  demonetization  of  that  metal.  Lord 
Farrer,  however,  observes:  "  This  act,  important  as  it 
has  been  considered  in  a  theoretical  point  of  view,  was 
probably  intended,  not  so  much  to  depose  silver  from 
its  rank  as  the  standard  metal,  as  to  obviate  the 
defects  of  the  silver  coins."  Generations  of  picking 
and  culling,  for  the  exportation  or  smelting  of  the 
heavier  pieces,  could  not  have  failed  to  leave  the  cir- 
culating mass  in  a  thoroughly  bad  condition,*  making 
it  unfit  for  large  payments.  The  act  referred  to  was 
temporary,  and  the  legal  status  of  silver  was  restored. 
What  would  have  happened  in  England,  regarding 
the  relations  of  silver  and  gold,  had  not  the  progress 
of  Napoleon's  army  on  the  Continent,  and  the  threat- 
ened destruction  of  its  world-wide  trade,  drawn  that 
country  into  the  vortex  of  inconvertible  paper,  can 
only  be  conjectured.  It  is  not  unreasonable  to  say 
that,  but  for  twenty  years'  experience  of  the  suspen- 
sion of  specie  payments,  the  demonetization  of  silver 
might  not  have  occurred.  For  just  at  this  time  gold 
was  rising  in  value.  At  the  beginning  of  the  century, 
it  had  been  worth  15.27  to  I  of  silver;  but  fell  con- 

*  An  examination  made  some  years  later,  in  1787,  showed  that 
the  half-crowns  were  over  9  per  cent,  below  weight,  shillings 
over  24  per  cent.,  and  sixpences  over  38  per  cent.  (Shaw,  His- 
tory of  Currency,  p.  237.) 


80  BIMETALLISM. 

tinuously  from  decade  to  decade,  till  near  the  close  of 
the  century,  when  it  was  worth  only  14.64  to  I.  This 
course,  as  we  have  seen,  tended  strongly  to  strip 
England  of  her  silver,  at  the  legal  rating ;  and  to  sub- 
stitute gold  in  her  circulation.  But,  about  1780,  the 
tide  turned;  gold  began  to  rise.  That  advance  went 
on  until  it  reached  an  average,  for  the  first  decade  of 
the  present  century,  of  15.61  to  I  of  silver,  which  was 
far  above  the  legal  ratio,  viz.,  15.2,  counting  the 
guinea  as  2 1  shillings.  Had  England  during  all  this 
period  been  in  the  actual  enjoyment  of  metallic  money 
of  both  silver  and  gold,  it  would  have  been,  to  speak 
mildly,  much  harder  for  Lord  Liverpool  and  the  elder 
Peel  to  carry  the  demonetization  of  silver.  But  the 
country,  by  the  Restriction  Act  of  1797,  came  under 
the  rule  of  inconvertible  paper  money;  and  it  was 
during  the  continuance  of  that  regime  that  the  act  was 
passed,  in  1816,  which  made  gold  coin  the  sole  legal 
tender  for  large  amounts  throughout  the  Kingdom, 
reducing  silver  to  the  rank  of  subsidiary  or  token 
money,  to  be  coined  only  at  the  instance  of  the  govern- 
ment. The  "  sovereign  "  was  coined  at  20  shillings, 
replacing  the  guinea  of  2 1  shillings ;  and  thus  one  of 
the  greatest  events  of  monetary  history  came  about. 
To  that  result,  the  Letter  of  the  first  Lord  Liverpool, 
On  the  Coins  of  the  Realm,  greatly  contributed.  We 
shall  have  occasion  to  speak  hereafter  of  the  conse- 
quences to  England  and  the  world  of  the  act  of  1816. 
At  present,  I  offer  a  few  brief  observations. 

1st.  The  monometallist  contention  that  the  single 
gold  standard  was  reached  through  the  operation  of 
perfectly  natural  causes,  Parliament  only  registering 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.       8 1 

the  result  to  which  commercial  forces  had  brought  the 
country,  does  not  seem  to  be  sustained.  Had  the 
Silver  Pound  remained  the  sole  standard  through  the 
period  we  have  been  considering,  and  gold,  coined  but 
without  an  official  value,  been  left,  free  of  all  execu- 
tive authority,  to  find  its  place  and  its  price,  the  final 
substitution  of  that  metal,  as  the  chief  and  nearly  the 
sole  money  in  circulation,  might  have  substantiated 
such  a  theory.  But  the  fact  that,  by  the  theory  of 
the  act  of  1666,  gold  and  silver  were  both  legal  tender; 
and,  whatever  the  actual  facts  of  their  use  between 
that  date  and  1717,  both  were,  after  the  latter  year, 
legal  tender  at  a  ratio  fixed  by  the  Crown,  this  alone 
makes  it  impossible  to  assume  that  commercial  causes, 
only,  operated  to  produce  the  result  finally  reached. 
Add  to  this  the  indisputable  fact  that,  during  the 
whole  of  this  period,  silver  was  underrated,  and  largely 
underrated,  in  the  coinage,  and  we  have  a  competent 
cause  for  the  whole  effect.  I  have  frankly  expressed 
the  opinion  that,  under  a  rating  which  fairly  repre- 
sented the  outside  market  ratio,  gold  would  have 
come  increasingly  into  use,  in  England.  But  this 
would  have  been  mainly,  perhaps  solely,  in  the  way 
of  a  re-enforcement  of  the  aggregate  circulation.  It 
was  the  law,  and  the  law  alone,  which  drove  silver 
out. 

2d.  The  assumption  that  England  had  by  this  time 
become  so  rich,  its  scale  of  prices  and  wages  so  high, 
that  gold  alone  would  answer  its  uses  for  principal 
money — silver  being  needed  only  for  purposes  of  small 
change,  is  absolutely  unjustifiable,  in  view  of  what  we 
know  about  the  state  of  things.  England  was  by  no 


82  BIME  TA  LL1SM. 

means  too  grand  and  rich  to  continue  to  use  silver. 
I  cannot  show  the  absurdity  of  the  argument  to  the 
contrary  better  than  by  quoting  a  paragraph  from 
Prof.  John  E.  Cairnes.  It  is  true  that  the  remark  re- 
lates to  a  later  period  of  history;  but  that  fact  only 
serves  to  make  the  case  stronger.  In  his  "  Character 
and  Logical  Method  of  Political  Economy,"  p.  141, 
note,  Prof.  Cairnes  says: 

"  We  are  told  that  silver  goes  to  Asia,  while  gold  remains  in 
Europe,  because  '  Europe  is  in  a  state  of  civilization  which  makes 
gold  the  most  convenient  metal  for  its  coin,  while  Asia  is  in  a 
state  of  civilization  which  makes  silver  the  most  convenient 
metal  for  its  coin.'  Now  it  is  certain  that  no  important 
change  has  taken  place  in  the  relative  civilization  of  Europe 
and  Asia,  and  I  may  add,  of  America,  during  the  last  ten 
years.  If  the  principle,  then,  were  a  good  one,  silver  would 
have  been  displaced  in  Europe  long  ago  ;  and  inasmuch  as  '  the 
civilization '  of  America  has  been  equally  in  advance  of  Ori- 
ental nations,  silver  would  never  have  been  the  chief  currency 
there.  But  silver  has  been  the  principal  currency  in  both 
France  and  America  until  recently ;  and  might  be  so  still,  in 
spite  of  their  '  civilization,'  were  their  mint-regulations  framed 
with  a  -view  of  retaining  it" 

3d.  The  assertion  that  England  owes  her  pros- 
perity to  the  single  gold  standard  is  weak  and  super- 
ficial. I  would  not  deny  that  England  may  have 
derived  some  selfish  or  particular  gain  from  acting  as 
broker  for  the  world  in  the  exchange  of  moneys  aris- 
ing out  of  the  fluctuations  of  gold  and  silver;  but  all 
this  could,  at  the  best,  be  but  a  very  small  part  of 
what  has  made  England  rich  and  powerful.  The 
foundations  of  her  commercial  and  industrial  great- 
ness were  laid  while  she  was  yet  under  the  so-called 


BIMETALLISM  IN  ENGLAND,  1666    TO   1816.       83 

double  standard.  Again?  England  from  1816  to  1873 
enjoyed  the  advantages  of  French  Bimetallism,  in 
common  with  all  the  world.*  Throughout,  her 
growth  was  largely  conditioned  upon  the  stability  of 
value  which,  as  we  shall  see,  was  given  to  the  world 
of  commerce  by  the  maintenance  of  that  system  on 
the  Continent. 

These  are  the  least  effective  answers  to  the  mono- 
metallist  claim.  The  chief  answer  is  that  a  sufficient 
cause  of  England's  growth  and  industrial  power  is 
to  be  found  elsewhere.  Can  I  do  better  than  quote 
from  Mr.  Goschen's  splendid  work,  ''  The  Foreign 
Exchanges,"  where  he  asks  why  London  is  the  centre 
of  the  world's  exchange  ?  "A  partial  cause  might  be 
found  in  the  credit  granted  by  London  bankers,  and 
also  in  the  greater  credit  of  London  houses,  extending 
to  all  quarters  of  the  world.  But  this  can  only  be 
called  a  secondary  reason;  and  appears,  on  closer 
examination,  to  be  itself  the  result  of  the  primary 
cause  that  makes  England  the  great  banking  centre  of 
the  world.  That  primary  cause  is  to  be  found  in  the 
stupendous  and  never-ceasing  exports  of  England." 
And  it  is  fair  to  add  that  this  greatness  of  exportation, 
this  domination  of  the  world's  markets,  came  to  Eng- 
land, first,  because  of  the  industrial  quality  of  her 
people ;  and  secondly,  because  it  was  in  England  that 
the  great  inventions  of  the  Industrial  Revolution  took 

*  "  Sir  W.  Harcourt  has  recently  said  England  owes  her  wealth 
to  her  stable  standard.  But  he  has  forgotten  to  add  that  up  to 
1873,  i.e.,  as  long  as  the  French  mints  were  open,  England  owed 
the  stability  of  her  standard  not  to  herself,  but  to  the  Latin 
Union."  (Dr.  E.  Suess.) 


84 

place.  The  remark  of  Mr.  Disraeli  (Lord  Beacons- 
field)  at  Glasgow,  in  1873,  is  in  the  same  vein:  "  It 
is  the  greatest  delusion  in  the  world  to  attribute  the 
commercial  preponderance  and  prosperity  of  England 
to  our  having  a  gold  standard." 


CHAPTER    IV. 

FRENCH   AND   AMERICAN   BIMETALLISM   TO    1851. 

LET  us  now  briefly  consider  French  and  American 
bimetallism  down  to  the  gold  discoveries  of  California 
and  Australia. 

The  experience  of  France  with  silver  and  gold, 
rated  to  each  other  in  the  currency,  had  been  much 
the  same  as  that  of  England,  during  the  greater  part 
of  the  eighteenth  century,  except  that  France,  by 
giving  a  lower  value  to  gold,  had  drawn  to  herself 
much  of  the  silver  coin  which  England,  to  her  great 
inconvenience,  was  constantly  losing.  The  fact  that 
the  French  ratio  was  much  nearer  the  value  of  the 
metals  in  the  bullion  market  enabled  her  to  keep  both 
in  concurrent  circulation  to  a  very  considerable  extent. 
I  have  quoted  Sir  Isaac  Newton's  words,  in  his  re- 
port of  1717,  to  show  that,  in  spite  of  a  wide  diverg- 
ence from  the  market  value,  silver  had  continued, 
through  a  long  period  of  time,  to  be  given  for  gold,  in 
England.  It  was  only  at  the  close  of  that  period  that 
the  distinguished  philosopher  who  was  Master  of  the 
Mint  was  obliged  to  contemplate  it  as  imminent  that 
the  people,  who  were  "  already  backward  to  give  silver 
for  gold,"  would  "in  a  little  time  refuse  to  make  pay- 
ment in  silver,  except  at  a  premium."  France,  during 

85 


86  BIME  TA  LLISM. 

the  greater  part  of  the  century,  actually  had  both 
metals  in  circulation,  contrary  to  the  familiar  monomet- 
allist  assertion.  In  his  report  of  1785,  the  Minister 
Calonne  says:  "  In  1726  the  legal  ratio  was  fixed  in 
France  at  14  marks  5  oz.  of  silver  to  a  mark  of  gold; 
and  that  which  proves  with  how  much  sagacity  this 
point  was  seized,  is  the  fact  that  during  a  long  course 
of  years  France  retained  in  her  circulating  medium  a 
sufficient  proportion  of  each  metal.  Nevertheless,  her 
gold  gradually  became  less  common ;  and  for  years  this 
scarcity  has  rapidly  increased."  It  was  in  view  of 
this  fast-developing  condition,  as  well  as  with  refer- 
ence to  the  state  of  her  circulating  coin,  that  the 
Minister  undertook  a  general  recoinage  of  gold  and, 
therewith,  a  change  of  the  rating  which  had  remained 
unaltered  for  60  years.  The  measure  was  carried 
out  in  1785.  As  the  new  ratio  taken  was  15^  to  I, 
against  the  old  ratio  of  14$,  and  as  the  market  rate  was 
stated  by  Calonne  to  be  at  the  time  about  15.08  to 
15.12,  the  recoinage  brought  a  profit  both  to  the 
treasury  and  to  the  holders  of  the  old  louis  d'or,  so 
far  as  these  were  of  full  weight.  It  will  be  observed 
that  free  coinage  of  gold  at  this  ratio  was  not  estab- 
lished: the  old  gold  was  recoined  at  the  new  valuation. 
This  is  the  first  appearance  of  the  famous  ratio  15^ 
to  i.  The  marked  advance  of  the  rating  of  gold  was 
of  an  heroic  nature.  One  may  conjecture  that  Calonne 
was  influenced  by  the  determination  to  bring  gold  into 
the  kingdom  rapidly,  and  by  a  belief  that  natural  and 
commercial  causes  were  operating  to  give  that  metal 
a  higher  value,  as  indeed  speedily  proved  to  be  the 
case.  The  actual  effects  of  the  measure  of  1785  upon' 


FRENCH  AND  AMERICAN  BIMETALLISM.         8/ 

the  market  value  of  the  metals  were  of  course  greatly 
diminished,  and  also  obscured  to  view,  through  the 
speedy  occurrence  of  the  Revolution.  The  acts  of 
violence  and  confiscation  which  marked  the  downfall 
of  royal  and  priestly  rule  wrought  a  disturbance 
amounting  almost  to  anarchy  in  trade ;  while  the  crazy 
issues  of  paper  money,  in  vast  volumes,  which  rose 
and  swelled  as  the  value  of  the  assignats  and  mandats 
declined,  reduced  production  almost  to  the  limits  of 
absolute  physical  necessaries.  The  economic  history 
of  this  period,  which  has  been  admirably  treated  by 
President  White,  is  of  great  interest  to  the  student  of 
money,  in  general,  but  of  little  to  the  student  of 
bimetallism. 

At  last  France  emerged  from  anarchy,  and  came 
under  the  control  of  a  ruler  no  less  masterful  in  civil 
than  in  military  affairs.  In  all  that  wonderful  career 
nothing  more  conclusively  shows  the  greatness  of 
Napoleon's  mind  than  that,  through  twenty  years  of 
war,  at  times  against  half  Europe,  he  never  once 
allowed  a  resort  to  the  delusive  expedient  of  incon- 
vertible paper  money.  Under  the  influence  of  the 
First  Consul,  the  Minister  Gaudin  instituted  and 
carried  through  the  Council  of  State  a  scheme  by  which 
the  silver  franc  was  made  the  monetary  unit  *  of  the 
Republic;  and  gold  was  to  be  coined,  in  20-  and  40- 
franc  pieces,  at  the  ratio  of  15^  to  I.  Free  (though 
not  gratuitous)  coinage  f  of  both  metals,  at  the  legal 

*  See  footnote  to  page  126. 

f  Coinage  is  said  to  be  free  when  any  individual  holder  of  bul- 
lion has  the  right  to  bring  it  to  the  mint,  in  any  quantity,  and 
have  it  coined,  whether  with  or  without  "  seigniorage."  Coinage 


88  BIMETALLISM. 

ratio,  was  instituted.     The  law  of  the  year  1803  (styled 
in  the  new  French  chronology  the  year  XI)  was,  in 
its  general  character,   much   like   others  which  after 
the  reintroduction  of  gold  coinage  in  the  thirteenth 
century  had  sought  to  give  this  or  that  country  a  con- 
current circulation  of  the  two  metals.     Yet  it  was  not 
only  to  become  and  remain,  for  the  two  generations 
succeeding,   a  power  for  good   which  can  hardly  be 
estimated,  but  it  was  to  give  rise  to  a  monetary  scheme 
of  still  wider  application  which  should  command  the 
support  of  hosts  of  economists,  financiers,  and  states- 
men of  the  highest  rank,  through  the  greatest  mone- 
tary controversy  of  the  world's  history.      No  purpose 
of  doing  aught  for  the  benefit  of  mankind,  in  general, 
entered  the  minds  of  those  who  took  part  in  this  legis- 
lation.     In  its  object  and   motive   the   measure  was 
just  as  individualistic   and    selfish    as   any   that  had 
preceded.     The  reasons  why  the  act  of  the  year  XI 
was  to  exert  an  influence  so  powerful  and  extensive 
were  two.      First,  the  policy  was  to  be  persisted  in. 
As  originally  presented,  the  plans  of  Gaudin  contained 
an   explicit   recognition   of  the   probability   that    the 
rating  of  gold  to  silver  might  require  to  be  altered 
from  time  to  time ;  but  this  was  stricken  out  in  the 
course  of  discussion;  and  the  ratio  of   15^  to   I   was 
adopted  without  any  suggestion  of  a  future  change. 
Courage  is  often  a  large  part  of  wisdom.     The  inten- 
tion thus  announced  was,  as  we  shall  see,  maintained 
and  made  good  against  a  tempest  of  monetary  disturb- 

is  said  to  be  gratuitous  when  the  full  amount  of  bullion  is  put 
into  the  coin,  the  mint  making  no  charge  for  the  cost  of  the  oper- 
ation. 


FRENCH  AND  AMERICAN  BIMETALLISM          89 

ances  which  might  well  have  appalled  the  bravest. 
The  second  reason  for  the  great  effect  exerted  by  the 
French  law  was,  that  that  country  employed  a  large 
quantity  of  metallic  money.  The  habits  of  the  people 
in  regard  to  the  keeping  and  carrying  of  money 
involved  the  use  of  the  precious  metals  to  a  really 
enormous  extent.  In  the  language  of  Mr.  Baring, 
"  the  circulation  was  saturated  with  specie."  It  was 
this  vast  endowment  which  enabled  France  so  long  to 
carry  on  that  great  function  of  the  exchange  of  the 
metals,  one  for  the  other,  which  was  to  save  the  com- 
mercial world  from  more  than  one  terrific  crisis.  As 
the  modern  ship  is  long  enough  to  cover  the  interval 
between  two  or  three  waves,  the  French  reserve  of 
metal  money  was  large  enough  to  outlast  fluctuations 
in  the  production  of  the  precious  metals  which  would 
have  completely  drained  away  the  stock  of  the  ap- 
preciating metal  from  almost  any  other  country  of 
Europe. 

The  virtue  of  the  bimetallic  law  was  destined  to  be 
severely  tried  from  the  start,  inasmuch  as  important 
changes,  both  in  the  natural  conditions  affecting 
supply,  and  in  the  commercial  or  legal  conditions 
affecting  demand,  began  to  take  place  almost  with  the 
promulgation  of  the  law  itself.  Let  us  first  speak  of 
the  changes  affecting  supply.  These  were  of  a  nature 
to  raise  silver  relatively  to  gold.  At  the  beginning  of 
the  century,  the  production  of  silver,  in  value,  was 
largely  in  excess.  But  the  tide  soon  turned.  Between 
1801  and  1810  the  proportion  was  3.226  to  i; 
between  1811  and  1820  it  was  3.048  to  i;  between 
1821  and  1830  it  sank  to  2.055  to  *J  between  1831 


pO  BIME  TA  LLISM. 

and  1840  to  1.865  to  i;  between  1841  and  1850  it 
was  .899  to  i.  It  is  true  that  the  stocks  of  both  silver 
and  gold  to  be  affected  were  now  so  large  that  such  a 
disproportion  in  the  current  yield  would  naturally 
cause  a  relatively  smaller  effect  than  during  the  first 
century  after  the  opening  of  the  mines  of  Potosi;  yet 
the  influence  of  such  disproportion  could  not  fail  to 
be  considerable  when  the  movement  was  persisted  in 
for  a  term  of  years. 

The  chief  explanation  of  the  falling  off  of  silver 
production,  relatively  to  that  of  gold,  was  found  in 
the  Mexican  and  South  American  revolutions,  rebell- 
ions, and  insurrections  which  followed  the  invasion  of 
Spain  by  Napoleon.  The  disastrous  effects  of  civil 
disturbances  upon  the  mining  industry  have  already 
been  referred  to.  Those  effects,  at  their  worst,  were 
experienced  in  the  unfortunate  countries  which  had 
thrown  off  the  yoke  of  Spain  without  acquiring  the 
instincts  of  self-government  and  respect  for  law.  Mine 
after  mine  was  closed  by  this  cause;  while  nearly 
every  mining  district  suffered  to  a  great  extent. 
Shortly  after  Spanish  America  had  thus  fallen  off  in 
its  production,  which  was  mainly  of  silver,  a  new  cause 
entered  to  increase  the  volume  of  gold.  The  Russian 
mines  in  the  Ural  Mountains,  which  had  been  worked 
before  the  Christian  era,  again  became  productive. 
Chevalier  states  their  yield  for  1830  at  £720,000.  A 
little  later  the  auriferous  sands  of  Siberia  were  dis- 
covered. 

These  concurring  causes-  affecting  supply,  namely, 
the  decline  of  silver  production,  shortly  after  the 
enactment  of  the  French  law,  and  the  increase,  about 


FRENCH  AND  AMERICAN  BIMETALLISM.         QI 

1830,  of  the  volume  of  gold  production,  might  have 
been  expected  to  cause  a  considerable  alteration  in  the 
market  ratio  between  the  metals,  in  the  direction  of 
making  gold  cheaper  and  silver  dearer.  On  the  other 
hand,  forces  were  operating  during  this  period  which 
tended  to  produce  effects  in  an  opposite  direction. 
Most  conspicuous  was  the  resumption  of  specie  pay- 
ments in  England,  under  the  law  of  1819,  by  which 
the  paper  money  of  the  realm  was  brought  back  to  a 
condition  of  soundness,  after  twenty  years  of  "  restric- 
tion."* Prof.  Hoffman  states  the  English  demand  for 
gold  for  redemption  purposes  at  more  than  four  times 
the  annual  production  of  all  the  known  gold-mines  of 
the  world  at  the  time  of  their  fullest  productiveness. 
Moreover,  we  cannot  feel  that  there  is  any  danger  of 
our  being  mistaken  in  thinking  that  the  increasing 
wealth  of  the  world  and  the  growing  disposition  to 
consume  wealth  luxuriously,  were  steadily  causing  the 
balance  to  incline  a  little  more,  generation  by  genera- 
tion, to  the  side  of  a  relatively  larger  demand  for  gold 
than  for  silver,  for  use  both  as  money  and  in  the 
decorative  arts.  I  have  previously  expressed  the 
opinion  that  this  tendency  has  been  greatly  overes- 
timated, for  controversial  purposes;  but  it  would  not 
be  candid  to  deny  that  the  tendency  existed  or  refuse 
to  give  it  a  place  in  our  consideration  of  the  subject. 

It  would  not  be  worth  while  to  spend  much  time 
over  the  course  of  things  in  France  during  the  first  two 
decades  of  the  century,  even  were  we  in  possession 
of  the  facts,  for  the  reason  that  unceasing  wars,  down 

*  That  is,  practically,  suspension  of  specie  payments. 


92  BIMETALLISM. 

to  1815,  created  abnormal  conditions,  not  only  as 
respected  finance  but  also  as  respected  trade  and 
production,  which  would  render  statistics  of  export  or 
import  of  little  significance.  As  a  matter  of  fact, 
precise  information  regarding  the  bullion  movement 
began  to  be  available  only  in  1822.  From  the  moment 
when  we  first  get  a  statistical  view  of  this  movement, 
we  find  it  steady  and  constant  in  the  direction  of  in- 
creasing the  proportion  of  the  silver  in  the  circulation 
of  France.  I  have  said  that,  during  the  period  we 
are  now  considering,  the  value  of  gold  in  terms  of 
silver  in  England  and  on  the  Continent,  most  of  the 
time,  stood  above  that  of  the  ratio  of  the  French 
mint.  The  average  of  the  quotations,  by  ten-year 
periods,  are  15.61  for  the  period  1801  to  1810;  15.51 
for  1811  to  1820;  15.80  for  1821  to  1830;  15.75  f°r 
1831  to  1840;  15.83  for  1841  to  1850.  These  figures 
exhibit  a  narrow  range  for  the  fluctuations  of  the 
precious  metals,  when  the  extent  and  force  of  the 
causes,  natural  and  commercial,  operating  to  produce 
divergence,  are  considered.  It  would  certainly  seem 
that  some  influence  was  at  work  to  counteract  the 
causes  which  operated  to  push  the  metals  apart, 
though  it  must  be  said  that  the  elements  in  the  case 
were  too  numerous  and  powerful,  and  are  too  little 
known  to  us  or  subject  to  our  measurement,  to  enable 
us  to  reason  with  confidence  upon  the  facts  of  the 
situation.  We  do  not  know  the  extent  of  the  stocks 
of  gold  and  silver  in  existence  when  the  changes  noted 
took  place  in  the  volume  of  current  production ;  nor 
can  we  even  pretend  to  estimate  the  increasing  de- 
mand for  gold  for  use  as  money  or  in  the  arts.  But 


FRENCH  AND  AMERICAN  BIMETALLISM.         93 

we  are  not  driven  to  calculate  nicely  the  degree  of 
the  conflicting  forces.  We  need  not  be  careful  to 
answer  in  this  matter.  "  Infallible  inference"  is  on 
the  side  of  those  who  hold  that  this  effect  of  the 
comparative  stability  in  the  value  of  the  precious 
metals,  during  this  period,  was,  in  some  large  meas- 
ure, the  work  of  the  French  law. 

There  are  many  well-meaning  persons  on  whom  the 
suggestion  that  law  can  affect  values  acts  like  the  pro- 
verbial red  rag  on  a  certain  pugnacious  and  aggressive 
animal.  They  become  simply  irrational  at  the  word. 
"The  impotence  of  law  to  affect  values"  is  their 
favorite  phrase.  The  terms,  folly,  idiocy,  lunacy, 
make  up  the  rising  scale  of  their  invecfive  against  all 
who  put  law  and  value  into  any  possible  relation  of 
cause  and  effect.  The  notion  that  law  cannot  influ- 
ence value  is  not  unnaturally  derived  from  certain 
conspicuous  instances  where  laws  have  attempted 
squarely  to  cross  the  economic  impulses  of  mankind 
and  to  thwart  the  instinct  of  self-interest  at  its 
maximum  of  activity  and  intensity,  and  have  failed. 
During  the  French  Revolution  the  government  put 
out  paper,  by  tens  of  thousands  of  millions  of  francs, 
which  it  declared  should  be  in  all  respects  the  equiva- 
lent of  coined  money  of  the  same  denominations;  yet 
the  paper  fell  rapidly  in  value  till  it  sank  out  of  sight. 
The  government  issued  decrees  which  fixed  the  prices 
of  commodities  in  terms  of  paper  money,  but  to  no 
purpose.  The  export  of  specie  was  made  a  crime; 
yet  specie  flowed  out  of  the  country.  In  our  own 
revolution,  the  Continental  Congress  went  through  the 
process  of  issuing  paper  in  enormous  amounts,  fixing 


04  BIMETALLISM. 

the  prices  of  commodities,  forbidding  the  "forestall- 
ing "  or  "engrossing  "  of  the  market;  but  the  normal 
operation  of  the  principle  of  individual  self-interest 
continually  thwarted  the  intentions  of  the  law-makers. 
Instances  like  the  foregoing  gave  rise  to  the  proposi- 
tion quoted,  viz.,  that  law  is  impotent  to  affect  values. 
Yet  there  are  numberless  instances  where  laws  have 
affected  values;*  and  there  is  not  a  civilized  country 
in  the  world  at  present  where  law  is  not  profoundly 
affecting,  if  not  controlling,  the  value  of  some  com- 
modity. Laws  often  affect  values  when  they  were  not 
intended  to  do  so.  Indeed,  it  is  often  difficult  to 
prevent  lawsf  from  affecting  values,  when  they  are 
passed  for  a  very  different  purpose,  even  when  the 
result  of  affecting  values  has  been  carefully  sought  to 
be  avoided. 

The  truth  of  the  matter  is,  law  cannot  affect  values, 
much  less  control  them,  except  as  it  sets  some  economic 
force  in  motion.  Whenever  law  sets  an  economic  force 
in  motion,  it  can  and  will  and  must  affect  values.  The 
degree  in  which  values  shall  be  affected  will  depend 
upon  the  extent  of  the  economic  forces  thus  put  into 
operation.  Had  it  been  said  that  "law  cannot  create 
value,"  that  is,  add  to  the  sum  of  wealth,  much  might 
be  urged  in  defence  of  this  proposition;  but  to  say 
that  law  cannot  affect  values,  that  is,  change  the  rela- 
tive values  of  different  things,  is  preposterous.  As 

*  See  the  discussion  of  this  subject  with  relation  to  the  export 
or  melting  of  coin  on  pp.  32.37,  ante. 

t  E.g.  treaties  of  war,  of  peace,  or  of  commerce,  currency 
measures,  acts  regulating  the  transfer  and  registration  of  prop- 
erty, etc. 


FRENCH  AND  AMERICAN  BIMETALLISM.         9$ 

regards  bimetallism,  then,  the  question  simply  is,  Can 
government  set  in  motion  any  economic  force  which 
will  affect  the  relative  values  of  gold  and  silver  ?  I 
answer  yes,  incontestably ;  and  that  force  is  one  of 
enormous  scope  and  reach.  By  declaring  the  two 
metals  indifferently  legal  tender  in  the  payment  of 
debts,  at  a  certain  ratio,  it  at  once  and  powerfully  in- 
fluences the  demand  for  one  and  the  other  of  the  two 
metals.  This  was  what  France  did  by  the  law  of  1803. 
That  law  gave  an  ounce  of  gold,  in  coined  money, 
precisely  the  same  power  to  pay  debts  as  that  pos- 
sessed by  1 5^  ounces  of  silver,  in  coined  money.  The 
operation  of  this  principle  was  simple,  instantaneous, 
automatic.  If,  at  any  time,  either  of  the  two  metals 
became  less  valuable  than  by  the  legal  ratio,  every 
debtor  instinctively  sought  coin  of  that  metal,  with 
which  to  meet  his  obligations,  in  preference  to  coin  of 
the  other  metal.  This  increased  the  demand  for  the 
cheaper  metal ;  and,  by  that  very  act,  decreased  the 
demand  for  the  metal  which  was  becoming  dearer  in 
the  market.  Now,  to  increase  demand  is,  other  things 
equal,  to  raise  price;  while  to  decrease  demand  is, 
other  things  equal,  to  lower  price.  Thus,  through  its 
power  to  regulate  the  payment  of  indebtedness,  the 
government  practically  threw  its  weight  upon  that  one 
of  the  two  metals  which  tended  to  rise,  and  kept  it 
down.  No  one  wanted  the  dearer  metal  to  pay  debts 
with;  every  one  wanted  the  cheaper  metal  for  that 
purpose;  and,  since  the  volume  of  indebtedness  com- 
ing due  every  day  in  any  commercial  country  is  very 
large,  the  force  thus  invoked  was  sufficient  to  produce 
an  enormous  economic  effect.  It  was  not  at  all 


g6  BIME  TA  LL1SM. 

because  the  French  government  declared  that  one  part 
of  gold  should  be  worth  15^  parts  of  silver,  that  this 
result  took  place;  but  because  the  French  government 
set  in  motion  competent  economic  forces  to  that  end.* 
The  principle  which  has  been  stated  is  absolutely 
incontrovertible.  One  has  to  go  as  far  away  from  the 
centres  of  educated  financial  opinion  as  Boston,  New 
York,  and  Chicago,  to  find  men  of  position  who  are 
capable  of  denying  it.  I  shall,  at  a  later  date,  quote, 
in  full  recognition,  not  only  of  the  theoretical  correct- 
ness of  this  principle,  but  of  its  practical  applicability 
to  the  case  under  consideration,  Chevalier,  in  his  day 
the  leading  monometallist  of  France;  the  monometal- 
list  Lexis,  the  first  economic  statistician  of  Germany, 
if  not  of  the  world ;  the  monometallists  Cairnes,  Jevons, 
and  Bagehot,  the  three  greatest  economists  of  England 
who  survived  John  Stuart  Mill;  and  Sir  Robert  Giffen 
and  Lord  Farrer,  to-day  the  chief  champions  of  mono- 
metallism. Every  one  of  the  men  quoted,  and  I  might 
add  a  score  of  eminent  names,  has  fully  and  ungrudg- 
ingly conceded  the  principle  stated.  The  concurrence 
of  general  opinion  on  this  subject  is  overwhelming. 
Not  a  person  worth  quoting  can  be  cited  to  the  con- 
trary effect. 

"So  long  as  the  provisions  of  the  year  XI  on  this  point  are 
allowed  to  remain,  and  so  long  as  France  shall  continue  to  offer 
great  masses  of  silver,  the  merchant  will  find  it  easy  to  barter 
his  gold  in  that  country  for  the  other  metal,  on  terms  which  de- 
viate little  from  those  prescribed  in  the  year  XI.  It  follows,  also, 
that  while  this  state  of  things  lasts,  it  will  be  impossible  at  London, 
Hamburg,  or  even  at  New  York,  or  any  other  great  centre  of  com- 
merce, for  gold  to  fall  muck  below  15^  times  its  weight  in  silver" 
(M.  Chevalier.) 


FRENCH  AND  AMERICAN  BIMETALLISM.         97 

I  have  said  that  the  principle  stated  above  is  ad- 
mitted with  practical  unanimity  by  all  who  are  compe- 
tent to  speak  on  financial  questions.  The  only  ques- 
tion that  can  possibly  arise  is  as  to  the  degree  of  the 
effect  produced.  On  this  point,  divergence  is  to  be 
expected  and  to  be  tolerated.  In  other  words,  the 
quality  of  the  effect  is  conceded.  The  quantity  of  the 
effect  is  in  dispute:  men  will  take  positions  on  that 
subject  according  to  their  predilections,  according  to 
the  amount  of  their  information,  according  to  their 
temperament  and  habit  of  mind.  This  is  simply  to 
say  that  the  question  of  bimetallism,  like  the  question 
of  protection,  and,  indeed,  like  most  other  questions  in 
economics,  is  purely  a  question  of  degree.  That  is 
the  very  expression  used  by  Jevons,*  many  years  ago, 
in  this  connection.  Whether  (i)  the  influence  which 
the  bimetallic  system  must  necessarily  exert  in  the 
direction  of  bringing  the  two  metals  together,  at  the 
mint-ratio,  will  prove  sufficient  importantly  to  modify 
the  tendencies  to  divergence  from  natural  or  com- 
mercial causes;  whether  (2)  that  influence  could  be 
made  to  go  so  far,  under  fortunate  circumstances,  as 
to  secure  a  reasonably  close  approximation  to  parity 
of  value  through  an  extended  period  of  time;  whether 
(3)  in  the  case  of  a  still  larger  application  of  the  prin- 
ciple of  the  indifferent  legal-tender  power  of  silver  and 
gold,  through  the  union  of  a  number  of  important 
commercial  nations,  that  influence  could  be  exerted 
to  the  point  of  practically  extinguishing  all  preference 
for  either  metal  outside  "the  bimetallic  basin"; 

*  Money  and  the  Mechanism  of  Exchange,  p.  141. 


98  BIME  TALL  ISM. 

whether  (4)  the  objects  to  be  gained  by  such  measures 
are  of  sufficient  consequence  to  compensate  for  the 
efforts  involved  in  setting  up  and  maintaining  the 
bimetallic  system — these  are  questions  regarding  which 
men  may  fairly  differ.  We  shall  be  in  a  better  posi- 
tion to  discuss  them,  from  the  bimetallist  point  of  view, 
when  we  have  seen  the  working  of  the  French  sys- 
tem, under  the  great  storm  which  followed  the  gold 
discoveries  of  California  and  Australia.  At  present 
I  wish  only  to  call  attention  to  the  unanimous  concur- 
rence of  educated  economic  opinion  as  to  the  validity 
of  the  principle  itself,  as  to  the  quality  of  the  effect 
to  be  produced.  But,  indeed,  there  is  small  need  of 
witnesses  on  such  a  point.  No  thinking  man  can  fail 
to  see  that,  if  such  a  system  as  the  French  is  brought 
into  operation,  it  must,  just  as  long  as  any  of  the 
appreciating  metal  remains,  exert  precisely  the  influ- 
ence indicated,  in  precisely  the  way  shown,  to  restrain 
for  the  time  any  and  all  tendencies  to  a  divergence  of 
the  two  metals  due  to  natural  or  to  commercial  causes, 
or  to  both. 

During  the  last  two  or  three  years,  in  the  absence 
of  anything  to  be  said  to  break  the  force  of  the  evi- 
dence establishing  the  efficiency  of  the  French  bime- 
tallic system,  a  great  deal  has  been  made  of  the 
argument  that,  in  setting  up  that  system  in  1803, 
France  had  no  thought  of  doing  a  service  to  mankind 
in  general,  but  was  actuated  solely  by  the  desire  to 
secure  for  herself  a  circulation  of  gold  and  silver.  It 
is  urged  that,  inasmuch  as  the  general  economic  benefit 
of  the  bimetallic  system  came  to  be  realized,  not  of 
purpose,  but  as  it  were  accidentally,  the  scheme  of 


FRENCH  AND  AMERICAN  BIMETALLISM.        99 

international  bimetallism  to-day,  in  the  general  inter- 
est of  mankind,  is  somehow  discredited.  The  New 
York  Evening  Post  has  sought  to  ridicule  this  view  of 
bimetallism  by  styling  its  advocates  "  Neo-bimetal- 
lists" ;  and  Mr.  Shaw,  in  his  "History  of  Currency," 
says :  ' '  There  was  no  conception  of  a  theory  of  bimetal- 
lism in  1803,  nor  any  conception  of  a  bimetallic  func- 
tion to  be  performed  for  the  good  of  the  human  race 
by  bimetallic  France.  This  is  a  conception  of  the 
schools  and  bred  of  later  needs  and  hopes  and  fears." 

It  is  difficult  to  comprehend  how  the  fact  that  the 
French  system  developed  the  practicability  of  a  larger 
service  and  usefulness  than  was  in  contemplation, 
constitutes  an  objection  to  bimetallism.  Such  a  plea 
bears  the  worn  and  painful  look  common  to  those 
arguments  which  men  advance  when  they  have  been 
beaten  on  all  their  original  contentions,  and  are  driven 
very  near  the  wall.  The  matter  does  not  seem  worth 
talking  about.  Among  the  various  accounts  given  of 
the  discovery  of  gunpowder  is  one  which  relates  that 
the  learned  and  curious  monk,  who  had  conducted  his 
researches  up  to  the  critical  point,  was  blown  out  of 
the  window  by  the  premature  ignition  of  the  com- 
pound. All  the  same,  gunpowder  was  discovered. 
In  like  manner,  it  does  not  in  the  least  matter  whether 
the  virtues  of  bimetallism  were  anticipated  by  the 
statesmen  of  France  in  1785,  or  in  1803,  or  were 
accidentally  hit  upon  as  the  result  of  French  experi- 
ence. There  is  an  old  and  eloquent  passage  which 
occurs  to  the  mind  in  such  a  connection,  "  They 
builded  better  than  they  knew." 

Why  should  it  be  deemed  reason  for  reproach  that 


I OO  B IME  TALLISM. 

the  theory  of  international  bimetallism  was  gradually 
developed?  The  monometallists  assert  that  their 
system  came  about  in  a  natural  way,  by  insensible 
gradations.  The  theory  of  international  bimetallism 
is  far  more  distinctly  and  unmistakably  the  product 
of  evolution.  First,  we  have  the  state  of  things  when, 
under  the  domination  of  utterly  false  views  regarding 
the  nature  and  office  of  money,  nations  struggled  with 
each  other  for  the  possession  of  the  existing  stock  of 
the  precious  metals;  while,  within  each  nation,  kings 
corrupted  their  own  coin  and  cheated  their  own  people. 
Then  we  reach  the  state  in  which  the  purposed  degra- 
dation of  the  coin  falls  out  of  the  toleration  of  man- 
kind, and  the  mints  of  Europe  become  honest,  while 
yet  the  monetary  theories  of  kings  and  parliaments 
remain  unenlightened.  Gradually  follows  the  decay 
of  the  mercantile  system,  in  'the  more  contracted  sense 
of  that  term,  that  is,  as  bearing  on  the  question  of 
money.  The  old  laws  prohibiting  export  or  melting 
down  of  the  precious  metals,  and  other  statutes  framed 
with  the  purpose  of  seizing  and  retaining  the  largest 
possible  share  of  the  world's  gold  and  silver,  are  re- 
pealed; trade  in  the  precious  metals  becomes  free. 
As  between  the  two,  silver  is  generally  the  standard, 
with  gold  rated  to  it,  from  time  to  time,  by  law  or 
proclamation.  Still  the  attitude  of  the  nations  remains 
individualistic,  selfish,  antagonistic ;  but  the  possession 
of  metal  money  is  no  longer  considered  the  sole  for- 
tunate result  of  trade,  the  one  object  of  production. 
The  office  of  money,  as  merely  the  tool  and  agency  of 
commerce,  comes  to  be  apprehended;  and  the  litera- 
ture of  the  subject  is  enriched  by  works  of  great  and 


FRENCH  AND  AMERICAN  BIMETALLISM.       IOI 

permanent  value.  The  next  step  forward  is  a  long 
one.  A  great  nation,  the  largest  metal-using  nation 
of  the  civilized  world,  establishes  in  permanence  a  ratio 
between  gold  and  silver;  and,  with  free  importation, 
free  coinage,  and  free  exportation,  undertakes  to 
regulate  and  control  the  value  of  the  precious  metals 
for  its  own  national  purposes.  This  great  experiment 
results  in  an  unexpected  benefit  to  mankind.  The 
astonishing  spectacle  is  exhibited  of  one  nation,  alone, 
unaided,  not  only  maintaining  that  monetary  system 
unshattered  and  almost  unshaken,  through  the  greatest 
storm  of  centuries,  but  even  preserving  the  monetary 
peace  of  the  world  and  carrying  Europe  safe  through 
what  threatened  to  be  a  complete  wreck  of  industry 
and  finance.  Out  of  this  experience  came  a  theory, 
the  theory  which  we  are  now  considering,  namely,  that, 
if  a  single  people  could  exert  such  prodigious  power 
in  influencing  and  controlling  the  relations  of  the  two 
money  metals,  by  admitting  them  freely  to  coinage  at 
a  ratio  and  making  them  indifferently  legal  tender  in 
the  payment  of  debts,  the  co-operation  of  a  group  of 
commercial  states,  both  increasing  the  strength  of  the 
bimetallic  system,  on  the  one  hand,  and,  on  the  other 
hand,  diminishing  the  extent  and  violence  of  the 
hostile  forces  by  which  it  could  in  any  event  be 
assailed,  might  suffice  to  give  the  world  a  circulating 
medium  which  should  be  essentially  the  same  in  all 
lands;  whose  value  should  be  more  stable,*  through 
long  terms  of  years,  than  either  of  its  two  constituents 

*  And  which  should  thus  be  "sound  money"  and  "honest 
money,"  in  a  much  higher  degree  than  monometallic  money  could 
be. 


I O2  BIME  TA  LLISM. 

could  possibly  be;  and  which,  by  creating  a  normal  par 
of  exchange  between  all  trading  communities,  should 
conduce  to  the  promotion  of  international  intercourse 
and  to  the  peace  and  prosperity  of  mankind.  No 
wonder  such  a  theory  had  to  wait  until  well  into  the 
middle  of  the  nineteenth  century  that  it  might  be 
born !  It  was  only  when  the  humane  sentiments  had 
made  great  progress  in  removing  the  prejudices  and 
animosities  of  nations  and  races;  when  international 
alliances,  leagues,  and  conventions  had  made  familiar 
the  idea  of  co-operation  for  the  general  good ;  when 
the  example  of  the  successful  maintenance  of  rules 
and  regulations  relating  to  a  great  variety  of  subjects, 
equally  well  in  war  and  in  peace,  had  banished  the 
incredulity  as  to  the  possibility  of  such  action  which 
arose  naturally  enough  from  national  hatreds,  sus- 
picions, and  mutual  injuries — it  was  only  in  such  a 
time  that  a  theory  like  that  of  international  bimetallism 
could  possibly  have  found  acceptance  on  the  part  of 
financiers,  statesmen,  and  men  of  business;  and  it  was 
only  when  the  true  theory  of  the  general  interest  of 
mankind  in  respect  to  money  had  been  developed  to 
the  point  reached  at  about  the  middle  of  our  own  cen- 
tury, that  such  a  theory  could  possibly  have  taken 
definite  form. 

I  have  spoken  of  the  co-operation  of  States  in  a 
bimetallic  league  as  both  increasing  the  strength  of 
that  system,  on  the  one  hand,  and,  on  the  other  hand, 
diminishing  the  extent  and  violence  of  the  hostile 
forces  by  which  it  can  in  any  event  be  assailed.  Let 
us  illustrate  this  point.  Each  country  which  enters  a 
bimetallic  league  strengthens  the  system  in  two  ways: 


FRENCH  AND  AMERICAN  BIMETALLISM.       IO3 

first,  by  contributing  to  the  stock  of  the  metal  which 
at  any  time  in  the  future  may  tend  to  become  the 
dearer  at  the  ratio;  secondly,  by  withdrawing  itself 
from  the  list  of  countries  which  can  participate  in  the 
drain  upon  the  appreciating  metal  in  the  bimetallic 
stock.  For  example,  let  us  suppose  that  the  com- 
mercial world  is  made  up  of  seven  nations,  A  to  G, 
inclusive,  equal  in  all  the  elements  which  affect  the 
monetary  problem.  Of  these,  A,  B,  and  C  are  gold 
monometallic  states;  D  is  bimetallic;  E,  F,  and  G 
are  silver  monometallic:  thus,  A,  B,  C,  (D),  E,  F,  G. 
Now,  in  case  gold  were  to  tend  to  become  more  valu- 
able than  silver  at  the  ratio,  the  new  silver  from  the 
mines,  and  probably,  also,  some  of  the  silver  from  E, 
F,  and  G,  would  pass  into  D,  be  there  exchanged  at 
the  ratio,  for  gold,  which  would  be  exported  to  A,  B, 
and  C,  where  some  small  profit  would  be  realized. 
This  movement  could  not  assume  an  indefinitely  ac- 
tive rate.  E,  F,  and  G  must  still  have  silver  enough 
for  their  own  circulation.  If  they  were  to  lose  any 
part  of  the  amount  actually  so  required,  that  would 
cause  the  value  of  silver  to  rise,  which  would  act  as  a 
check  to  any  further  export  of  that  metal.  On  the 
other  hand,  A,  B,  and  C  cannot  take  an  indefinite 
amount  of  gold  as  money.  Were  they  to  import  gold 
above  the  amount  required  for  their  ordinary  circula- 
tion, that  of  itself  would  make  gold  prices  rise,  which 
is  the  same  as  saying  that  the  purchasing  power  of 
any  given  quantity  of  gold  would  fall,  which  fact 
would  tend  to  diminish  or  altogether  destroy  the  ad- 
vantage of  further  importing  that  metal.  In  the  same 
way,  if  silyer  tended  to  become  the  dearer  at  the 


104  BIMETALLISM. 

ratio,  the  new  gold  from  the  mines,  and  probably, 
also,  some  from  A,  B,  and  C,  would  be  sent  into  D, 
and  there  exchanged  for  silver,  which,  in  turn,  would 
be  exported,  with  some  little  profit,  to  E,  F,  and  G. 
This  process,  however,  would  be  limited,  as  to  its  rate 
and  its  duration,  by  the  causes  already  indicated. 

From  the  foregoing  illustration  it  appears  that,  in 
the  given  case,  country  D,  in  order  to  sustain  its 
bimetallic  system,  must  possess  a  stock  of  gold  suffi- 
cient to  withstand  a  drain  from  A,  B,  and  C,  in  case 
gold  should  become  the  dearer,  at  the  ratio,  and  a 
stock  of  silver  sufficient  to  sustain  the  drain  from  E, 
F,  and  G,  should  silver  become  the  dearer.  Now,  let 
us  suppose  that  one  gold  monometallic  state,  C,  and 
one  silver  monometallic  state,  E,  join  D  in  a  bimetallic 
league:  thus,  A,  B,  (C,  D,  E),  F,  G.  Not  only  is 
the  stock  subject  to  drain,  in  the  case  of  important 
changes  in  the  conditions  of  production  and  use  of  the 
precious  metals,  three  times  as  great  as  before,  but 
the  possible  force  of  that  drain  has  been  diminished  in 
the  proportion  of  three  to  two.  In  the  event  of  either 
metal  tending  to  become  dearer,  at  the  ratio,  we 
should  now  have,  not  three  gold  states  or  three  silver 
states  drawing  upon  one  bimetallic  state  for  the  appre- 
ciating metal,  but  two  gold  states  or  two  silver  states 
drawing  upon  three  bimetallic  states.  It  is  easy  to 
see  that  the  bimetallic  system,  through  this  reinforce- 
ment, has  been  strengthened,  as  against  any  hostile 
force  likely  to  present  itself,  not  threefold,  but  ten- 
fold, or  twentyfold,  or  thirtyfold.  To  increase  the 
"factor  of  safety"  in  a  bridge  from  2  to  4,  is  not 
merely  to  diminish  by  one  half  the  chances  of  disaster, 


FRENCH  AND  AMERICAN  BIMETALLISM.       10$ 

as  against  the  hostile  forces  likely  to  operate  in  the 
case.  It  will  diminish  the  chances  of  accident  in  far 
higher  proportion;  it  may  even  reduce  them  to  noth- 
ing. The  difference  may  be  mathematically  infinite.* 
With  such  a  relation  of  the  parties  to  international 
commerce  as  has  been  supposed,  it  might  never  happen 
that  the  drain  upon  the  diminishing  metal  would  be 
sufficiently  active  or  long  continued  to  afford  any 
appreciable  strain  to  the  bimetallic  system. 

Returning  to  the  point  as  to  the  larger  view  taken 
of  the  relations  of  money  to  production  and  trade  and 
general  prosperity,  as  the  result  of  the  experience  and 
observation  of  more  recent  times,  I  cannot  do  better 
than  to  quote,  from  the  English  Historical  Review  for 
October,  1895,  the  very  suggestive  remarks  of  Pro- 
fessor Herbert  S.  Foxwell,  St.  Johns  College,  Cam- 
bridge, Jevons's  successor  as  lecturer  in  Political 
Economy  in  University  College,  London,  and  the 
editor  of  his  posthumous  works.  Prof.  Foxwell  says: 

"  There  are  two  kinds  of  problems  involved  in  the  working 
of  monetary  systems — problems  of  internal  equivalence,  or 
parity,  and  problems  of  external  valuation,  or  stability  of  pur- 
chasing power.  The  currencies  of  all  civilized  nations  are 
composite,  some  of  them  composite  in  a  high  degree ;  all  use 
various  metals  as  well  as  paper,  and  have  several  forms  of  legal 
tender.  With  all  advanced  nations  it  is  a  first  principle  that 
the  various  constituents  of  their  currencies  shall  circulate  at 

*  It  is,  of  course,  conceivable  that  an  extraordinary  concurrence 
of  winds  and  tides  might  wreck  a  bridge  with  a  factor  of  safety 
of  four,  as  readily  as  one  with  a  factor  of  safety  of  two;  but,  on 
the  other  hand,  out  of  a  hundred  or  a  thousand  storms  any  one 
of  which  would  prostrate  the  latter,  not  one  might  seriously  en- 
danger the  former. 


1 06  BIME  TA  LLISM. 

the  par  indicated  by  their  nominal  values.  This  parity  may  be 
secured  in  various  ways — by  limitation  of  issue,  as  in  the  case 
of  token  coinages  ;  by  convertibility  on  demand,  as  in  the  case 
of  notes ;  or  by  free  mintage  at  a  fixed  ratio,  as  in  the  case  of 
French  bimetallism.  .  .  .  But  the  other  group  of  problems 
concerned  with  the  external  relations  of  a  currency,  while 
they  both  now  are  and  always  have  been  infinitely  more  impor- 
tant in  their  historical  effects,  present  difficulties  which  are 
still  unsolved.  Reasonable  stability  of  prices  is  the  first  condi- 
tion of  social  justice  in  a  society  whose  economic  relations  are 
determined  by  price.  Clearness  and  fixity  of  relation  be- 
tween the  moneys  of  various  nations  are  as  essential  to  inter- 
national trade  as  the  internal  parity  of  a  currency  is  to  domes- 
tic trade.  But  the  currencies  of  the  Western  world  are  still 
notoriously  unstable  in  their  purchasing  power ;  and  the 
'  break  of  gauge '  between  East  and  West  still  continues,  in 
spite  of  the  repeated  efforts  of  Europe  to  remove  it.  The  real 
importance  of  currency  history  and  the  real  interest  of  cur- 
rency study  lie  in  these  questions  of  valuation — of  the  external 
relation  of  currencies."  (pp.  772-3.) 

In  continuation  of  the  subject,  Professor  Foxwell, 
in  his  address  before  the  National  Liberal  Club,  in 
March,  1895,  said: 

"  Writers  upon  monetary  matters  may  be  divided  into  two 
classes.  There  are  those  who  look  at  money  from  the  point  of 
view  of  the  coinage  or  the  bank  counter,  and  whose  ideals  are 
satisfied  when  all  the  various  forms  of  circulation  in  which 
they  are  directly  interested  exchange  at  par,  and  without  in- 
convenience. There  are  others  who  are  not  content  to  stop 
here,  but  go  on  to  inquire  into  the  adequacy  or  inadequacy  of 
this  composite  and  interchangeable  circulation — to  ask  what 
are  the  variations  in  its  purchasing  power,  how  far  it  possesses 
that  stability  of  value  without  which  it  cannot  be  regarded  as 
a  just  or  convenient  money  standard.  .  .  .  Writers  of  the  first 
class  are  usually  monometajlists." 


FRENCH  AND  AMERICAN  BIMETALLISM. 


THE  EXCHANGE  OF  THE  METALS. 
Returning  from  this  excursion,  let  us  see  exactly 
what  took  place  in  France  between  1803  and  the  gold 
discoveries  of  California  and  Australia.  It  has  already 
been  said  that  even  approximate  statistics  of  the 
bullion  movement  were  not  available  until  1822;  but 
common  fame  is  a  sufficient  witness  that,  from  an  early 
point  in  the  century,  there  was  a  movement  in  prog- 
ress bringing  silver  rapidly  into  France.  When  we 
first  get  the  actual  figures  of  importation,  we  find  that 
country  taking  up  an  enormous  amount  of  the  world's 
silver  and  coining  it  into  five-franc  pieces.  From  1822 
to  1851,  a  period  of  thirty  years,  the  net  importations 
of  silver*  reached  2680  million  francs,  or  536  million 
dollars,  or  107  million  pounds  sterling.  It  was  the 
assumption  by  France  of  this  mass  of  silver,  under  her 

*  TABLE  OF  NET  IMPORTS  OF  SILVER  INTO  FRANCE,  1822  TO  1851, 
INCLUSIVE.     (!N  FRANCS.) 


1822 125,000,000 

1823 114,000,000 

1824 124,000,000 

1825 Not  stated 

1826 " 

1827 "   " 

1828 " 

1829 "   " 

1830 151,000,000 

1831 181,000,000 

1832 60,000,000 

1833 75,000,000 

1834 101,000,000 

1835 74,000,000 

1836 27,000,000 


1837 144,000,000 

1838 120,000,000 

1839 75,000,000 

1840 96,000,000 

1841 117,000,000 

1842 92,000,000 

1843 103,000,000 

1844 82,000,000 

1845 90,000,000 

1846 47,000,000 

1847 53,000,000 

1848 214,000,000 

1849 244,000,000 

1850 73,000,000 

1851 78,000,000 


(Shaw's  History  of  Currency,  p.  184.) 


IO8  BIMETALLISM. 

bimetallic  system,  which  kept  the  two  metals  so  near 
the  ratio  which  had  been  adopted  by  the  Act  of  1803, 
against  all  the  forces  making  for  divergence.  It 
speaks  for  itself  that,  but  for  this,  the  divergence  must 
have  been  vastly  greater  than  it  was.  I  have  already 
mentioned  the  ratios  between  the  metals,  by  ten-year 
periods,  according  to  which  the  prices  in  the  Ham- 
burg market  stood  always  above  the  gold  price  of 
silver  as  fixed  at  the  French  mint.  The  figures  of 
yearly  fluctuations,  however,  are  not  so  uniform,  and 
are  found  now  on  one  side  and  now  on  the  other  of 
the  line  of  15.50,  though  generally,  and  subsequently 
to  1819  always,  on  the  side  which  represents  a  value 
of  gold  larger  than  15^  times  its  weight  in  silver.  In 
France,  however,  by  the  necessity  of  the  case,  the  ratio 
of  the  market  remained  ever  very  close  to  that  of  the 
mint.*  Inasmuch  as  any  person  had  a  right  to  bring 
silver,  in  unlimited  quantities,  to  be  coined  into  five- 
franc  pieces,  which  could  be  exchanged  against  gold 
at  the  ratio  of  15^  to  I,  no  holder  of  silver  would, 
under  the  normal  operation  of  the  principle  of  self- 
interest,  sell  silver  bullion  under  that  ratio,  by  more 
than  the  slight  amount  which  represented  the  cost  of 
rendering  the  silver  into  coin,  including  the  element 
of  loss  of  time.  Nor,  with  such  a  market  continu- 
ally open,  could  silver  fall  in  any  considerable  degree 
below  that  ratio  in  any  of  the  bullion  markets 
of  the  world.  As  M.  Chevalier  said:  So  long  as 

*  In  1828,  Mr.  Alexander  Baring,  afterwards  Lord  Ashburton, 
stated  that  the  variation  rarely  exceeded  one-tenth  of  one  per 
cent,  though  under  exceptional  conditions  it  might  reach  one- 
quarter  of  one  per  cent, 


FRENCH  AND  AMERICAN  BIMETALLISM.      ICX) 

France  stood  ready  to  coin  silver  at  this  ratio,  it  was 
impossible  that  the  gold  price  of  silver,  thus  estab- 
lished, should  be  far  departed  from  at  London,  Ham- 
burg, or,  as  he  adds,  "even  at  New  York."  The 
word  "even"  has  reference,  not  only  to  the  greater 
distance  of  New  York,  than  of  London  or  Hamburg, 
from  the  Paris  mint,  but  also  to  its  greater  proximity 
to  the  mines  of  California.  And  this  leads  me  to 
remark  that  the  figures  given  of  bullion  quotations  in 
foreign  markets  have  to  be  considered  always  in  con- 
nection with  the  elements  of  cost  involved  in  moving 
the  metal  to  France,  and  securing  its  coinage.  In 
an  article  in  the  Quarterly  Journal  of  Economics  for 
January  of  this  year,  Professor  Willard  Fisher,  of 
Wesleyan  University,  says: 

"  Professor  Laughlin  utterly  fails  to  grasp  what  bimetallists 
claim  for  and  expect  from  their  system  ;  and  he  makes  the 
same  mistake  that  Mr.  Robert  Giffen  made  in  his  Case  against 
Bimetallism.  They  both  think  that,  if  the  French  law  of  1803 
had  any  effect  upon  the  market  value  of  the  precious  metals,  it 
must  have  kept  the  commercial  ratio  at  exactly  15^  to  i  ;  and, 
in  citing  the  familiar  fact  that  the  market  figures  fluctuated  up 
and  down,  but  rarely,  if  ever,  coincided  with  the  mint  ratio, 
they  complacently  assume  that  they  have  refuted  the  histori- 
cal argument  for  bimetallism.  But  it  is  absolutely  certain  that 
no  such  identity  of  ratios  could  be  expected,  even  by  the 
most  confident  bimetallist.  So  long  as  there  are  seigniorage 
charges,  freight  charges,  insurance  fees,  or  any  other  expenses 
involved  in  passing  metal  through  the  mint,  the  nominal 
legal  ratio  is  never  the  effective  mint  ratio.  The  inefficiency 
of  the  French  law  in  steadying  the  relative  values  of  the  precious 
metals  can  never  be  proved  by  citing  differences  between  the 
market  ratio  and  the  nominal  legal  ratio,  unless  it  be  shown 
that  the  differences  are  greater  than  can  be  accounted  for  by 
(i)  the  seigniorage  and  all  other  mint  charges,  (2)  the  cost  of 


1  1  0  JBIME  TA  LLISM. 

transporting  the  metal  from  the  market  whose  ratio  is  cited  to 
the  mint,  (3)  the  fees  for  insurance  during  the  transit,  (4)  the 
agents'  commissions,  (5)  the  interest  on  the  capital  temporarily 
locked  up,  and  (6)  the  exigencies  of  sudden  and  urgent  demand. 
But  no  man  has  even  so  much  as  attempted  to  examine  thus 
fully  the  deviation  of  the  London  market  from  the  French 
mint  ratio.  Let  just  a  simple  hint  as  to  the  effects  of  these 
various  charges  and  expenses  suffice.  The  law  of  1803  imposed 
a  seigniorage  of  nine  francs  a  kilo  on  gold,  and  three  francs  a 
kilo  on  silver  ;  and,  if  no  thought  be  given  to  the  five  other 
heads,  this  mint  charge  alone  makes  the  effective  legal  ratio, 
not  iSito  i,  but  anywhere  between  15.736+  to  I  and  15.45510  i." 


We  shall  have  occasion  to  trace  the  further  progress 
of  the  experience  of  France  under  the  Act  of  1803. 
We  shall  see  its  monetary  system  exposed  to  terrific 
trial  by  the  floods  of  new  gold,  as  the  result  of  the 
almost  simultaneous  discovery  of  the  two  greatest  gold- 
fields  which  the  world  had  ever,  or  has  ever,  known. 

BIMETALLISM   IN   THE    UNITED    STATES. 

The  history  of  bimetallism  in  the  United  States 
does  not  call  for  extended  treatment.  Were  it  not 
for  the  manner  in  which  the  subject  has  been  mis- 
represented, I  should  devote  to  it  even  less  time. 
There  is  enough  to  quarrel  about,  in  the  history  of 
American  bimetallism;  but  there  is  little  that  is  in- 
structive, and  nothing  that  tells  upon  either  side  of 
the  issue  over  international  bimetallism.  Certain 
statements,  however,  by  monometallist  champions  re- 
quire attention.  In  his  "  History  of  Bimetallism  in 
the  United  States,"  Professor  Laughlin  says: 

"No  experiment  of  bimetallism  has  ever  been  inaugurated 
under  circumstances  more  favorable  for  its  success  ;  and  no 


FRENCH  AND  AMERICAN  BIMETALLISM.      1 1  I 

hostility  or  suspicion  attended  its  progress.  No  fairer  field  for 
its  trial  could  have  been  found  ;  and  its  progress  under  such 
conditions  makes  its  history  peculiarly  instructive.  We  have 
had  in  this  country  a  legal  and  nominal  double  standard  from 
the  establishment  of  the  mint  in  1792  to  the  present  day,  with 
the  exception  of  the  years  between  1873  and  1878;  and  in  this 
period  of  about  ninety  years  we  have  had  almost  every  possi- 
ble experience  with  our  system.  Has  it  proved  a  success  in 
the  past  ?  What  lessons  does  it  offer  for  the  future  ?"  (p.  8.) 
"  There  probably  never  was  a  better  example  of  the  double 
standard,  one  more  simple,  or  one  for  whose  successful  trial 
the  conditions  could  have  been  more  favorable."  (p.  23.) 

In  the  same  vein,  Lord  Playfair,  in  a  tract  recently 
published  by  the  Gold  Standard  Defence  Association, 
of  England,  after  describing  the  American  experience, 
announces  the  conclusion:  '  This  short  history  of 
bimetallism  in  the  United  States  conclusively  shows 
that  no  ratios  between  silver  and  gold  have  been  able 
to  maintain  a  parity  of  value  between  silver  and  gold, 
or  to  lessen  the  operation  of  the  Gresham  law,  that 
undervalued  and  overvalued  money  cannot  remain  in 
concurrent  circulation — at  least,  in  parity."  Such  an 
assertion  would  naturally  create  in  the  mind  of  the 
reader,  and  especially  the  English  reader,  the  belief 
that  bimetallism  had  been  fairly  and  fully  tried  in  the 
United  States — tried  in  good  faith,  tried  under  favor- 
able circumstances;  and  that,  so  tried,  it  had  resulted 
in  failure.  Such  a  belief  would  be  entirely  erroneous. 
Bimetallism  never  has  been  fairly  tried  in  the  United 
States;  and  the  results  of  such  efforts  as  have  been 
made  do  not  justify  any  inference,  whatever,  adverse 
to  real  international  bimetallism. 

In  the  first  place,  a  fair  trial  of  bimetallism,  under 


1 1 2  BIME  TALLISM. 

reasonably  favorable  conditions,  could  not  possibly, 
in  the  nature  of  the  case,  have  been  conducted  here. 
The  people  of  this  country,  throughout  the  period 
under  consideration,  habitually  used  so  small  an 
amount  of  either  or  both  of  the  precious  metals,  in 
comparison  with  other  nations,  and  in  comparison  with 
the  stock  of  these  metals  throughout  the  world,  that  a 
bimetallic  law  here  instituted  could  not  have  afforded 
a  fair  trial  of  bimetallism.  No  one  asserts  that  a 
bimetallic  law  can  control  or  influence  the  market 
ratio  of  the  two  metals,  except  as  its  operations  affect 
the  demand  for  the  one  or  the  other,  for  gold  or  for 
silver.  Now  the  industry  and  commerce  of  this 
country  and  the  habits  of  the  people  in  the  use  of 
money  during  the  early  part  of  the  century,  rendered 
the  amount  for  which  the  bimetallic  system  could  pos- 
sibly create  a  demand  inexpressibly  small  in  comparison 
with  that  of  almost  any  other  civilized  nation.  Even 
when  commerce  extended  itself  and  manufactures 
arose,  the  use  of  metal  money  by  the  American  people 
remained  inconsiderable.  Not  only  was  the  demand 
for  one-dollar  bills  universal ;  but,  in  many  cases,  the 
issues  went  down  to  fractions  of  the  dollar,  one  half, 
one  quarter,  and  even  lower.  During  the  War  of 
Secession,  "  shinplasters,"  as  they  were  popularly 
known,  were  issued  of  the  nominal  value  of  five  cents. * 
Not  only  did  the  American  people  carry  the  use  of 
paper  money  to  these  absurd  lengths;  but  the  methods 
of  American  banking,  throughout  all  the  early  time  to 
which  Lord  Playfair  especially  refers,  required  only 

*  Mr.  John  Jay  Knox  in  his  "  History  of  United  States  Notes," 
speaks  of  pieces  of  paper  of  as  low  a  value  as  three  cents. 


FRENCH  A  ND  A  M ERICA  X  BIME  TA  LLISM.      \  1 3 

the  most  trivial  reserves,  if  any,  of  specie,  to  support 
the  paper  issues.  There  were  cases  where  the  specie 
reserves  of  the  banks  of  an  entire  State  fell  to  three 
per  cent  of  the  immediate  liabilities,  or  even  lower. 
In  numerous  instances  the  reserve  was  practically  nil. 
Prof.  Sumner  gives  an  account  of  one  bank  whose  cir- 
culating bills  were  estimated  at  $580,000,  arid  which 
had  in  its  vaults  at  the  time  of  its  failure  only  $86.46 
in  specie. 

Could  a  bimetallic  law,  attempting  to  influence  the 
ratio  between  silver  and  gold — which  is  precisely  what 
a  bimetallic  law  does  attempt  to  do — possibly  have 
anything  like  a  fair  trial,  in  a  country  where  the  use 
of  either  metal,  or  of  both  combined,  was  so  small  ? 
Compare,  in  this  respect,  the  France  of  1810-20,  its 
"  circulation  saturated  with  specie,"  to  use  the  phrase 
of  Mr.  Baring,  with  the  United  States  of  the  same 
period.  And  yet  it  was  within  these  years,  as  Prof. 
Laughlin,  the  monometallist  champion,  tells  us,  that 
the  fate  of  bimetallism  in  the  United  States  was  vir- 
tually decided.*  What  conclusions,  adverse  to  the 

*  The  principal  controversy  as  to  the  history  of  bimetallism  in 
the  United  States  has  arisen  over  the  question  when  gold  went 
out  of  circulation  under  the  first  ratio,  namely,  that  of  15  :  i.  The 
monometallists  assert  that  this  took  place  as.  early  as  1817.  The 
bimetallists  assert  that  it  was  several  years  later  when  the  English 
Resumption  Act  had  called  for  something  like  £25, 000,000  in  gold. 
There  are  statements,  somewhat  in  the  nature  of  evidence,  on 
both  sides  ;  but  those  quoted  by  the  monometallists  are  subject 
to  the  same  exceptions  which  are  taken  to  the  assertions  that 
gold  was  not  in  circulation  in  France  during  the  greater  part  of 
the  eighteenth  century,  prior  to  the  Act  of  1785  ;  that  after  1822 
gold  was  again  completely  out  of  circulation  in  that  country  un- 
til the  Californian  and  Australian  discoveries  ;  and,  finally,  that 


114  BIMETALLISM. 

system  we  propose,  could  fairly  be  drawn  from  any 
effort,  however  sincere  and  earnest,  on  the  part  of  a 
people  who  were  so  little  in  a  condition  to  exert  a 
practical  influence  upon  the  market  value  of  either  or 
both  the  money  metals  ? 

But,  secondly,  it  must  be  added  that  the  manner  in 
which  bimetallism  was  put  into  operation  here,  by  the 
Act  of  1792,  on  the  one  hand,  or  by  that  of  1834,  on 
the  other,  was  such  as  necessarily  to  bring  about  an 
early  failure,  even  though  the  principle  of  bimetallism 
were  admitted  to  be  perfectly  sound.  The  ratios 
taken,  first  in  1792,  and  secondly  in  1834,  were  such 
as  fully  to  justify  the  statement  that  bimetallism  never 
was  fairly  tried.  Indeed,  respecting  the  legislation  of 
1834,  we  may  say  that  it  is  beyond  question  Congress 
did  not  expect  or  intend  the  concurrent  circulation  of 
the  two  metals. 

When  Congress  and  the  Secretary  of  the  Treasury, 
in  1792,  came  to  fix  the  ratio  at  which  the  two  metals 
should  be  coined,  they  selected  that  of  15  to  I. 
Something  may  be  said  in  favor  of  Mr.  Hamilton's 
good  faith  in  selecting  this  ratio ;  but  Lord  Playfair 
himself  states  that  the  real  value  was  more  nearly  the 
French  ratio  of  15^  to  i.  We  have  not  time  here  to 
discuss  the  question  whether  Hamilton  really  intended 
to  find  the  true  value  of  silver  in  terms  of  gold,  and  of 
gold  in  terms  of  silver.  The  fact  is,  the  ratio  adopted 
was  one  beneath  the  commercial  value  of  gold.  It 
was,  also,  apart  from  the  ratio  which  had  been  estab- 
lished in  France,  under  Calonne,  in  1785.  Had 

silver  disappeared  wholly  from  circulation  in  France  after  1852. 
On  these  points  see  pp.  85,  86,  119,  120,  and  126. 


FRENCH  AND  A  M ERIC  A  N  BIME  TA  LLlSM.      1 1 $ 

Congress  really  desired  and  intended  to  establish  a 
bimetallic  system,  and  had  it  acted  with  mere,  ordinary 
intelligence,  it  would  have  chosen  the  French  ratio. 
It  would  have  joined  its  force,  small  as  that  was,  to 
that  of  France  in  holding  together  gold  and  silver  at 
the  ratio  of  15^  to  I  ;  and,  since  "every  little  helps," 
such  co-operation  might  have  had  an  influence  at  some 
critical  points  in  the  period  which  followed.  The 
deliberate  choice  of  a  ratio  apart  from  that  of  the 
French,  and  less  favorable  to  gold,  could  possibly  have 
but  one  result.  It  is  difficult  to  see  how,  to  the  mind 
of  an  intelligent  financier,  such  an  act  could  have  had 
any  other  meaning  and  purpose  than  that  the  United 
States  were  to  supply  themselves  freely  with  silver, 
from  Mexico  and  the  West  Indies,  over-bidding 
France  and  Europe  generally  in  this  respect,  and 
letting  gold  go,  as  less  suited  to  the  immediate  wants 
and  occasions  of  the  American  people,  in  that  stage  of 
their  commercial  and  industrial  development.  But, 
whether  Hamilton*  and  the  American  Congress  really 
at  the  time  meant  this,  or  not,  the  fact  that  they 
exerted  whatever  force  they  had  in  pulling  against  the 

*  Professor  Laughlin  clearly  expresses  the  opinion  that  Hamil- 
ton did  not  expect  to  obtain  gold  for  domestic  circulation,  and 
that  he  fixed  the  ratio  at  such  a  point  as  to  make  certain  that  the 
United  States  would  attract  to  itself  a  sufficient  amount  of  silver. 
"  Although  he  [Hamilton]  preferred  a  single  standard  of  gold, 
he  must  be  content  to  take  what  he  could  get;  and  silver  was 
most  easily  secured  for  the  new  currency.  .  .  .  Like  the  farmer 
of  limited  means,  who  preferred  the  better  though  more  expen- 
sive land,  but  took  the  cheaper  piece  because  it  was  within  his 
reach,  Hamilton  naturally  adopted  the  poor-country  plan;  and, 
in  order  to  secure  a  metallic  currency,  took  measures  to  retain 
silver,  the  best  he  could  get — with  the  hope  of  keeping  gold  also." 


1 1 6  JBIME  TA  LLISM. 

French  ratio,  instead  of  pulling  with  it,  destroys  the 
value  of  every  inference  from  the  result  of  that  ex- 
periment against  the  proposal  for  a  true  and  loyal 
international  bimetallism.  Hence  I  deem  it  too 
much  to  say,  so  far  as  the  period  1792  to  1834  is  con- 
cerned, that  the  "  history  of  bimetallism  in  the 
United  States  conclusively  shows  that  no  ratios  be- 
tween silver  and  gold  have  been  able  to  maintain  a 
parity  of  value  between  silver  and  gold." 

If  bimetallism  was  not  fairly  tried  in  the  United 
States  prior  to  1834,  how  was  it  after  that  date  ?  At 
that  time  the  public  mind  of  the  United  States  was 
agitated  by  the  discovery  of  gold-mines,  of  unknown 
value,  in  Georgia  and  North  Carolina,  and  elsewhere 
in  the  southern  Appalachian  chain.  There  was  thus 
created  a  particular  and  local  interest — which  de- 
manded that  gold  be  favored  in  the  coinage,  just 
as,  forty  years  later,  a  particular  and  local  interest 
demanded  legislation  to  promote  the  silver  interest. 
With  this,  in  1834,  coincided  a  political  movement  of 
tremendous  force,  arising  from  hostility  to  the  United 
States  Bank,  an  issue  which  was  then  convulsing  the 
country  from  end  to  end.  One  of  the  parties  to  this 
controversy  united  with  the  representatives  of  the 
interested  sections  in  demanding  a  readjustment  of 
the  ratio.  The  bill,  as  first  introduced,  made  the  new 
ratio  approximately  that  of  the  market,  namely,  I  to 
15.6.  In  this  form  the  measure  was  apparently  in 
the  interest  of  bimetallism.  Even  this  appearance 
was  not  long  maintained.  The  ratio  of  i  to  15.6  was 
thrown  overboard,  and  that  of  I  to  16  adopted.  The 
bill  was  popularly  known  as  the  Gold  Bill.  Its  advo- 


FRENCH  AND  AMERICAN  BIMETALLISM.       1 1/ 

cates  were  jubilant  and  aggressive;  and  the  purpose 
of  overvaluing  gold  was  announced.  Only  one  result 
could  follow.  Silver,  thus  largely  undervalued,  to  a 
great  extent  left  the  country.  The  United  States 
could,  at  the  best,  have  exerted  little  influence  upon 
the  market  value  of  the  two  metals,  for  the  reason,  as 
previously  stated,  that  the  people  used  little  metal 
money  of  either  kind.  Even  this  degree  of  influence, 
instead  of  being  used  to  sustain  bimetallism,  was 
practically  exerted  against  it. 

How,  in  the  face  of  such  facts  regarding  bimetal- 
lism in  the  United  States  after  1834,  can  it  possibly 
be  said,  in  Lord  Playfair's  terms,  that  the  history  of 
that  time  conclusively  shows  that  no  ratios  between 
silver  and  gold  have  been  able  to  maintain  a  parity 
between  silver  and  gold  ?  According  to  the  undisputed 
record,  according  to  Lord  Playfair's  own  views,  the 
United  States  were  not  attempting  to  secure  bimetal- 
lism ;  they  purposely  overvalued  gold  in  the  coinage ; 
they  deliberately  chose  not  to  join  their  forces  with 
those  of  France  in  the  attempt  to  maintain  a  con- 
current circulation;  but,  as  in  1792,  took  a  ratio  apart. 
How  Prof.  Laughlin  can  justify  to  himself  such  state- 
ments as  that  "no  experiment  of  bimetallism  has  ever 
been  inaugurated  under  circumstances  more  favorable 
for  its  success.  .  .  .  No  fairer  field  for  its  trial  could 
have  been  found ;  .  .  .  there  probably  never  was  a 
better  example  of  the  double  standard,  one  more 
simple,  or  one  for  whose  successful  trial  the  conditions 
could  have  been  more  favorable,"  utterly  passes  my 
comprehension. 


CHAPTER   V. 

FRENCH    BIMETALLISM   TO    1873. 

IN  the  last  chapter  we  saw  France,  through  a  long 
term  of  years,  importing  vast  quantities  of  silver, 
under  the  operation  of  the  bimetallic  system,  that 
metal  being  overvalued  at  the  mint,  and  consequently 
finding  there  its  best  market.  We  saw  that  this  opera- 
tion became  continuous  from  some  time  considerably 
earlier  than  1822;  and  that,  from  the  latter  date  on 
to  1851,  the  net  importation  of  silver  reached  the 
enormous  aggregate  of  2680  million  francs.  In  pop- 
ular statements  regarding  this  period,  it  is  usually 
said  that  this  influx  of  silver  was  coincident  with  a 
large  exportation  of  the  undervalued  gold.  The  figures 
of  the  French  custom-house  do  not  bear  out  this 
assertion.  From  1822  to  1851  the  exports  of  gold  in 
some  years  exceeded  the  imports.  In  other  years  the 
current  was  reversed.  In  the  aggregate  of  the  whole 
period,  the  imports  actually  exceeded  the  exports.* 

To  say  that  France  did  not,  in  this  period,  part  with 
her  gold  is,  however,  not  to  say  that  the  proportion 
of  the  two  metals  in  her  currency  did  not  undergo  a 
change.  In  the  first  place,  so  great  is  the  waste  of 

*  It  is  not  improbable  that  the  gold  carried  out  of  France  "on 
the  person  "  may  have  made  up  the  difference. 


FRENCH  BIMETALLISM    TO    1873. 

coined  money  by  accidental  loss,  and  ordinary  "wear 
and  tear,"  even  with  the  improvements  of  modern 
coinage,  that  the  mere  cessation  of  importation  of  one 
metal  would  in  no  long  time  cause  a  considerable 
alteration.  In  the  second  place,  the  demand  for 
gold  to  be  used  in  the  arts,  industrial  and  decora- 
tive, was  all  the  while  drawing  down  the  monetary 
supply  of  this  metal.  In  the  third  place,  it  is  un- 
doubtedly true  that  the  instinct  of  hoarding,  always 
strong  in  France,  attached  itself  under  these  circum- 
stances especially  to  gold ;  and  that  this  metal  came 
to  be  found  in  constantly  increasing  amounts  in  private 
stocks,  and  in  the  reserves  of  bankers  and  merchants. 
In  the  last  instance,  however,  the  gold  remained  as 
purely  money  as  if  in  circulation.  Bankers  and 
merchants  must  have  reserves,  of  one  metal  or  the 
other;  and  the  fact  that  gold  was  more  and  more  taken 
for  this  purpose,  in  this  time,  did  not  constitute  a  true 
reduction  of  the  money-supply,  unless,  indeed,  those 
reserves  were  excessive. 

The  joint  effect  of  these  causes,  acting  in  reduction 
of  the  supply  of  gold  money  in  France,  combined  with 
the  influence  of  an  enormous  importation  of  silver,  had, 
by  1851,  brought  about  a  very  different  proportion  of 
the  two  metals  in  the  circulation  from  that  which  had 
existed  in  the  earlier  time.  It  is  a  familiar  statement 
that  no  gold  money  was  left  in  France,*  that  the  cir- 

*Thus,  Mr.  Henry  Dunning  MacLeod,  in  his  tract,  published 
by  the  Gold  Standard  Defence  Association,  says:  "  In  1839-40  I 
resided  in  France;  and  I  can  certify  that  there  was  no  gold  to  be 
seen  in  common  use."  So  a  traveller  in  the  United  States  to-day 
might  go  far  without  seeing  a  piece  of  gold  ;  yet  we  are  supposed 


I2O  BIMETALLISM. 

culation  had  come  to  be  completely  of  silver.  This 
statement  is  of  the  same  kind  as  those  upon  which  I 
commented  unfavorably  in  a  previous  chapter.  It  is 
true  that  the  mass  of  gold  money  had  been  reduced 
greatly.  It  is  true  that  money  of  this  kind  in  ordinary 
circulation  had  been  reduced  still  more  greatly;  but 
it  is  also  true  that  at  any  time  within  this  period  there 
was  gold  money  in  France,  just  as  there  had  been  gold 
money  from  the  year  1726  down  to  or  towards  1785  : 
gold  money,  performing  the  normal  office  of  money, 
to  be  met  with  in  trade  and  to  be  exchanged  for  silver 
at  the  legal  ratio.  Probably  if  the  natural  conditions 
of  the  production  and  supply  of  the  two  metals  had 
continued  the  same  during  a  much  longer  period,  the 
result,  which  is  so  often  erroneously  declared  to  have 
taken  place,  would  have  come  about;  and  France 
would  have  been  brought  down  to  silver  monometal- 
lism, the  law  of  1803  to  the  contrary  notwithstanding. 
It  cannot  be  too  frequently  said  that  law  can  control  or 
influence  values  only  by  setting  in  operation  an 
economic  force ;  and  a  bimetallic  law  can  only  bring  an 
economic  force  to  bear  upon  the  values  of  the  two 
metals  so  long  as  some  appreciable  amount  of  that 
metal  which  at  the  time  tends  to  become  the  dearer 

to  have  some  hundreds  of  millions  in  this  country  performing 
the  office  of  money,  either  in  circulation  or  serving  as  the  basis 
of  coin  certificates,  or  held  as  banking  reserves.  Prof.  Hlmile  de 
Laveleye  states  that  France  from  1803  to  1842  coined  47,779,389 
gold  twenty-franc  pieces.  Mr.  MacLeod  was  very  unlucky  not  to 
see  one  of  them.  The  aggregate  value  was  nearly  a  thousand 
million  of  francs.  The  average  gold  coinage  during  this  period, 
when  it  is  customary  to  say  that  gold  had  gone  out  of  circulation, 
5n  France,  wag  about  twenty-four  million  francs  a  year, 


FRENCH  BIMETALLISM   TO   1873.  121 

remains  subject  to  exchange.  But  the  amount  of 
metallic  money  normally  in  use  in  France  was  large 
enough  to  extend  across  two  periods  of  fluctuation 
in  the  production  of  the  precious  metals,  at  least  as 
those  periods  have  been  measured  in  our  century. 
France  preserved  her  bimetallic  system  in  full  virtue 
from  1819,  when  the  market  value  of  gold  bullion 
in  England  and  on  the  Continent  rose  definitively 
above  the  ratio  of  the  Paris  Mint,  down  to  the  mid- 
dle of  the  century,  when  the  era  of  the  great  gold- 
production  began.  And,  again,  as  we  shall  see,  she 
was  able  to  carry  that  system  on,  through  the  period 
when  gold  was  coming  in  upon  her  mints  like  the 
waters  of  a  broken  dam,  an'd  to  maintain  a  stock 
of  the  then  appreciating  silver  until  a  third  great 
change  took  place  in  the  natural  conditions  of  produc- 
tion; and  silver,  in  its  turn,  tended  to  fall  in  com- 
parison with  gold.  For  myself,  I  entertain  not  the 
slightest  doubt  that,  but  for  the  hostile  action  of  Ger- 
many between  1871  and  1873,  France,  with  her  then 
monetary  allies  of  the  Latin  Union,  would  have  been 
able  to  continue  this  beneficent  function  on  to  our 
own  day,  when  the  South  African  gold-fields,*  were 

*The  reports  of  the  Director  of  the  U.  S.  Mint  give  the  follow- 
ing figures  for  the  African  yield: 

1887 2,888  kilos 

1888 6,771      " 

1889 12,920      " 

1890 15.432      " 

1891 23,687      " 

1892 36,461      " 

1893 43,550      " 

1894 60,595      " 


1 22  BIME  TA  LLISM. 

so  unexpectedly  opened  to  human  enterprise.  For 
this  reason,  it  seems  to  me  that  the  image  of  a  ship 
long  enough  to  ride  over  two  or  three  waves  at  once 
is  not  inappropriate. 

THE    GOLD    PANIC. 

In  1848  occurred  the  discovery  of  gold  on  the 
Pacific  coast  of  North  America.  Only  three  years 
later,  on  the  other  side  of  the  globe,  gold  was  discov- 
ered in  enormous  and  seemingly  inexhaustible  amounts 
in  Australia.  It  is  surely  one  of  the  most  marvelous 
coincidences  of  human  history,  that  of  the  three  great 
"finds  "  of  the  yellow  metal  which  have  occurred  since 
authentic  history  began,  two  should  have  come  within 
so  narrow  a  space.  The  aggregate  effect  upon  the 
supply  of  gold  produced  by  the  simultaneous  discov- 
ery of  the  California  and  Australia  mines,  together 
with  a  three-  or  four-fold  increase  in  the  yield  of  the 
alluvial  deposits  of  the  Ural  Mountains,  threatened 
for  the  time  to  be  overwhelming.  The  average  pro- 
duction of  the  world  had  been  twenty  or  thirty  mil- 
lion dollars.  In  a  few  years  it  rose  to  five  times  that 
amount.  Within  the  ten  or  twelve  years  suceeding 
1851  it  is  estimated  that  the  stock  of  gold  in  the 
hands  of  civilized  man  was  literally  doubled!  During 
the  decade  1801-10  the  production  of  silver  had  been 
to  that  of  gold,  by  weight,  50.2  to  i;  during  the 
decade  1851-60  it  was  only  4.4  to  I,  a  change  to  the 
extent  of  nearly  j^.  M.  Chevalier  states  the  change 
in  production  in  still  higher  terms.  In  1857  he  wrote 
that  the  production  of  gold  as  compared  with  silver 


FRENCH  BIMETALLISM    TO    1873.  123 

had  increased  five-fold  since  1851,  and  fifteen-fold  in 
the  course  of  only  forty  years.  A  veritable  gold-panic 
set  in.  It  hardly  seemed  to  any  one  out  of  France 
that  it  would  be  possible  to  stem  the  flood,  and  to  save 
commercial  and  financial  values  from  such  a  fall  as 
would  amount  to  the  destruction  of  all  individual 
credit.  Few  dared  to  hope  that  the  barrier  which 
France  had,  to  this  time,  interposed  against  fluctua- 
tions in  the  value  of  the  two  metals,  could  long  with- 
stand the  strain.  If  once  that  gave  way,  gold  might 
fall,  in  a  succession  of  plunges,  from  crag  to  crag, 
down  to  a  level  which  would  mean  nothing  less  than 
universal  bankruptcy.  Estimates  were  freely  made 
that,  from  being  worth  15^  to  I  of  silver,  it  would 
soon  be  worth  12  to  I,  10  to  I,  even  8  to  I.  In  his 
book  on  the  "Probable  Fall  in  the  Value  of  Gold," 
Chevalier  more  than  once  uses  the  illustration  of  a  fall 
to  one-half  its  former  value.  He  indeed  states  that 
this  assumption  is  not  the  result  of  anything  like  exact 
computation,  and  is  only  used  to  show  briefly  and 
strikingly  what  might  come  from  the  bursting  of  the 
great  reservoir  and  the  rushing  of  its  mighty  waters 
down  upon  the  marts  of  trade  and  the  seats  of  indus- 
try; but  Chevalier  would  not  have  used  this  illustra- 
tion so  freely  had  he  regarded  it  as  an  extravagant 
statement  of  the  possibilities,  and  even  the  reasonable 
probabilities,  of  the  case. 

The  nations  of  Europe  were  prompt  to  take  alarm 
at  the  menace  to  industry,  finance,  and  even  the  social 
structure.  "Ten years  ago,"  wrote  M.  Leon  Faucher, 
in  1852,  in  his  work  The  Production  of  the  Pre- 
vious Metals,  ' '  every  one  was  frightened  at  the  pros- 


1 24  BIME  TALLISM. 

pect  of  the  depreciation  of  silver:  during  the  last 
eighteen  months,  it  is  the  diminution  in  the  price  of 
gold  that  has  been  alarming  the  public."  In  June, 
1850,  Holland*  demonetized  the  gold  lo-florin  piece 
and  the  guillaume.  Portugal  prohibited  any  gold 
from  having  current  value,  except  English  sovereigns. 
Belgium  demonetized  its  gold  circulation.  Russia  pro- 
hibited the  export  of  silver,  as  the  metal  likely  to 
become  the  very  stay  and  staff  of  the  national  exist- 
ence. Austria,  which  was  then  on  a  basis  of  incon- 
vertible paper,  thought  that  the  cheapening  of  gold 
offered  a  favorable  opportunity  to  come  to  a  metallic 
basis,  and  called  the  German  states  to  meet  in  a 
monetary  conference  at  Vienna.  The  other  states 
feared  the  depreciating  gold  and  insisted  on  the  single 
silver  standard.  The  most  that  Austria  could  do  was 
to  secure  the  concession  of  the  coinage  of  gold  crowns 
as  trade  pieces !  (Suess/  Die  Zukunft  des  Goldes, 
11,  12;  Soetbeer,  Litteraturnachweis  iiber  Geld-  u. 
Miinzwesen,  77,  78.) 

*This  measure  had  been  outlined  and  announced  as  early  as 
1847;  but  remained  inchoate  and  ineffective  until  the  Gold  Panic. 
M.  Faucher  attributes  the  chief  effect  prejudicial  to  gold,  at 
this  time,  to  the  Dutch  demonetization.  The  amount  thus 
thrown  upon  the  market  was  more  than  twice  the  annual  produc- 
tion of  that  metal  before  1851.  Moreover,  he  alleges,  the  Act 
was  blunderingly  accomplished.  The  estimated  amount  to  be 
demonetized  was  only  one-half  the  real  amount,  as  ascertained, 
and  the  provision  for  refunding  was  inadequate.  Again,  too 
short  a  time  was  fixed  for  redemption.  As  a  consequence  of 
these  blunders,  an  unnecessary  gold  panic  was  induced.  M. 
Faucher  says:  "To  prevent  future  evil,  they  created  immediate 
mischief;  and,  in  order  to  shelter  themselves  from  the  risk  of  a 
future  depreciation  of  gold,  they  directly  produced  it," 


FRENCH  BIMETALLISM   TO   1873.  125 

In  some  countries  shops  sought  to  attract  trade  by 
offering  to  receive  gold  at  par.  M.  de  Laveleye  states 
(La  Mon.  et  le  Bimet.,  p.  xii)  that  traders  hung  out 
the  sign,  "L'or  est  re$u  sans  perte  " !  "Even  in 
England,"  wrote  Chevalier,  "some  persons  have  put 
forth  the  advice  that  the  standard  should  be  altered, 
and  that  silver  should  be  substituted  for  gold.  They 
ground  their  opinion,  primarily,  upon  the  plea  of 
principle,  in  maintaining  that,  gold  having  ceased  for 
an  interval  of  time,  which  may  possibly  be  rather  long, 
to  satisfy  the  essential  condition  of  having  a  value 
relatively  stable,  it  thereby  loses  its  aptitude  for  the 
functions  of  money."  So  respectable  an  authority  as 
Mr.  James  Maclaren,  author  of  the  "  History  of  the 
Currency,"  put  forth  a  proposal  that  life-insurance 
companies  should  be  established  on  a  silver  basis. 
Certain  American  corporations,*  in  the  same  period, 
sought  to  safeguard  themselves  by  similar  arrange- 
ments; and  to  this  day  have  the  satisfaction  of  receiv- 
ing, every  month,  a  certain  number  of  ounces  of  fine 
silver,  paid  in  for  rents  under  contracts  then  made. 
One  English  financier  is  quoted  as  declaring  that  gold 
would  soon  only  be  "fit  for  the  dust-pan." 

Amid  this  general  alarm,  amounting  to  panic,  the 
statesmen  and  financiers  of  France  stood  firm.  The 
government,  indeed,  assembled  a  commission  for  the 
consideration  of  the  question  in  its  new  and  startling 
aspects;  and  some  economists,  like  Chevalier,  declared 
in  favor  of  silver  monometallism,  as  the  only  hope  of 
preserving  industry  and  trade  and  the  social  structure. 

*The  Essex  and  Holyoke  Water-power  Companies  were  among 
the  number. 


1 26  BIME  TA  LL1SM. 

Chevalier  proposed  to  return  to  the  system  in  force 
down  to  1785,*  when  silver  was  the  standard;  and 
gold  was  rated  to  it,  by  law  or  proclamation.  He  pro- 
posed that  this  rerating  should  be  made  every  six  to 
twelve  months,  to  keep  pace  with  the  fall  of  gold! 
He  even  raises  the  question  whether  the  gold  coin  thus 
issued  should  not  be  restricted  as  to  the  amount  for 
which  it  could  be  tendered!  And  this,  of  Gold! 
The  man  who  could  put  forward  such  a  proposal 
should  have  been  prosecuted  for  tese  majestt.  But 
the  hearts  of  the  men  who  controlled  the  destinies  of 
France  did  not  fail.  Freely  that  country  gave  of  her 
silver  to  alljf  freely  took  gold  from  all,  without  fear 

*  Chevalier  claimed  that  silver  was  still  the  standard  in  France, 
in  spite  of  the  measures  of  1785  and  1803.  He  speaks  of  France 
as  having  "  a  silver  standard  but  a  gold  currency."  He  relies 
on  a  quoted  utterance  of  Calonne. 

f  I  have  quoted  M.  Calonne  to  show  that,  in  spite  of  "  Gresham's 
Law,"  the  appreciating  metal  remained  in  actual  circulation  dur- 
ing the  greater  part,  at  least,  of  the  period  1726-1785  ;  and  have 
stated  that,  between  1803  and  the  Californian  discoveries,  al- 
though silver  was  being  imported  to  an  enormous  extent,  because 
overvalued  in  the  coinage,  gold  still  remained  money  in  France 
in  appreciable  quantities.  I  now  quote  M.  de  Parieu  to  prove  that, 
during  the  great  influx  of  gold  after  1853,  silver  did  not  disappear. 
That  gentleman,  a  leading  monometallist,  and  Vice-President  of 
the  International  Conference  of  1867,  on  that  occasion  said: 
"  Great  masses  must  be  operated  upon,  to  find  a  profit  in  the  ex- 
change of  metals  ;  and  the  change  of  metals  takes  place  slowly, 
by  successive  movements.  For  these  reasons,  the  general  circu- 
lation is  neither  suddenly  nor  seriously  affected  by  changes  in 
the  relative  value  of  the  metals,  for  France  has  always  had  much 
silver  in  circulation,  even  when  that  metal  was  largely  exported." 

In  the  same  vein,  Chevalier,  writing  his  Baisse  Probable,  in 
1858  or  1859,  says  (p-  276)  :  "  II  reste  en  France  encore  beaucoup 
de  monnaie  d'argent,  tout  ce  qu'il  en  faut  pour  composer,  avec 


FRENCH  BIMETALLISM   TO   1873. 

of  its  becoming  worthless  on  her  hands.  Year  after 
year  the  flood  of  the  yellow  metal  poured  in  upon  her 
mints;  and  her  moneyers  stood  at  their  posts  to  coin 
it  and  give  it  back,  full  legal  tender,  at  15^  to  I.  In 
the  eight  years  between  1853  and  1860,  both  inclu- 
sive, there  was  imported  into  France  gold  to  the  value 
of  3082  million  francs,  or  616  million  of  dollars,  or 
123  million  pounds  sterling.  Coincidently  with  this 
influx  of  gold  began  the  exportation  of  silver.  In  the 
eight  years  of  which  we  have  just  spoken,  France  sold 
silver  to  the  amount  of  1465  million  francs,  or  293 
million  dollars,  or  59  million  pounds  sterling. 

In  his  testimony  before  the  Herschell  Commission 
in  1887,  Sir  R.  Giffen  notes,  as  "a  curious  thing," 
that,  while  220  million  pounds  sterling  of  gold  was 
coined  in  France  in  1850  to  1865,  and  "although  that, 
to  a  large  extent,  arose  through  France  having  sub- 
stituted gold  for  silver  in  its  money,  owing  to  the 
bimetallic  arrangement,  yet  the  amount  of  silver  which 
France  sent  away  was  very  much  less  than  that.  I 
think,"  he  says,  "it  was  only  about  75  million  pounds 
sterling."  I  confess  I  see  nothing  curious  about  the 
matter.  It  has  been  stated  that  between  1822  and 
1851,  although  France  exported  no  gold  in  excess  of 
imports,  there  was  a  great  change  in  the  proportion  of 
the  two  metals  in  her  circulation,  owing  to  the  effects 
produced  upon  her  unre-enforced  stock  of  gold  by 
ordinary  wear,  by  consumption  in  the  arts,  by  hoard- 

les  billets  de  banque,  et  avec  Tor  luime'me  qu'il  ne  s'agit  point 
d'exiler,  un  instrument  des  echanges  tres-efficace  et  tres-solide- 
ment  organise,  en  conformite  de  la  pensee  qui  animait  le  legisla- 
teur  de  1'an  XI." 


1 28  BIME  TA  LLISM. 

ing,  and  by  the  substitution  of  that  metal  for  silver, 
in  the  reserves  of  merchants  and  bankers.  In  this  in- 
stance, France  influenced  the  value  of  silver  by  buying 
of  it  largely;  and  she  also  influenced  the  price  of  gold 
by  not  buying  of  it,  as  usual,  and  consequently  re- 
ducing the  normal  demand  upon  the  current  supply. 
Between  1850  and  1865  France  again  influenced  the 
relative  value  of  the  two  metals,*  this  time  both  by 

*  Prof.  Willard  Fisher  has  furnished  me  the  following  interest- 
ing and  instructive  note  : 

Divide  the  history  of  coinage  in  France  under  the  law  of  1803 
into  five  periods,  1803-1820,  1821-1847,  1848-1852,  1853-1866, 
1867-1873. 

In  the  first  period  of  18  years  the  annual  average  market  ratio 
was  in  9  years  above  15^,  and  in  9  years  below  ;  and  the  coinage 
was  about  equally  of  gold  and  silver,  865,000,000  fr.  gold  and 
1,091,000,000  silver. 

In  the  second  period  the  ratio  was  every  year  above  the 
nominal  mint  ratio  and  the  coinage  was  301,000,000  gold,  and 
2,778,000,000  silver. 

In  the  third  period,  while  gold  was  beginning  to  come  on  the 
market  and  the  ratio  was  falling  below  15^  :  i,  the  coinage  was 
again  about  equal,  448,000,000  gold  and  543,000,000  silver. 

In  the  fourth  period  the  ratio  of  the  market  value  was  for  no 
year  above  15^  :  i,  and  the  coinage  was  mostly  gold,  5,311,000,000 
gold  and  157,000,000  silver. 

In  the  fifth  period  the  ratio  was  every  year  above  15^  :  i,  and 
the  coinage  was  less  and  less  of  gold  till  in  1872  and  1873  none 
was  coined  (Shaw's  History  of  Currency,  185) ;  but  the  total 
coinage  of  this  fifth  period  was  of  gold  878,000,000,  of  silver  587,- 

000,000. 

G.  S.. 

1803-1820 865,000,000  1,091,000,000 

1821-1847 301,000,000  2,778,000,000 

1848-1852 448,000,000  543,000,000 

1853-1866 5,311,000,000  157,000,000 

1867-1873 878,000,000  587,000,000 

Both  gold  and  silver  were  coined,  in  quite  considerable  amounts, 


FRENCH  BlAfETALLISM   TO   1873.  1 29 

buying  enormously  of  gold  and  by  selling  silver 
largely.  That  the  imports  of  gold  still  much  exceeded 
the  exports  of  silver  is  sufficiently  explained  by  the 
fact  that  the  aggregate  stock  of  the  world's  money 
was  rapidly  increasing;  and,  of  course,  France's  dis- 
tributive share  of  that  stock  increased,  also.  Under 
the  operation  of  the  bimetallic  law,  that  increase  was 
wholly  of  gold. 

Such  was  the  course  of  the  greatest  financial  storm 
of  two  centuries.  By  the  end  of  1860  the  gale 
had  well-nigh  blown  itself  out,  though  the  waves 
were  still  running  high.  During  the  decade  then  clos- 
ing, there  had  been  added  to  the  stock  of  gold  1407 
million  dollars,  as  estimated  by  Soetbeer;  1257  mill- 
ion, as  estimated  by  Tooke  and  Newmarch.  Even 
these  figures  do  not  fully  express  the  shock  which 
the  bimetallic  system  had  to  bear  during  this  tre- 
mendous crisis.  Not  only  was  France  without  an 
ally  in  sustaining  the  ratio  of  1 5^  to  I ;  but,  in  addi- 
tion to  the  blows  which  fell  upon  her  from  the  enor- 
mously increased  production  of  gold,  she  had  to  meet 
the  hostile  action  of  other  nations  in  demonetizing  that 
metal,  or  restricting  its  use  within  their  own  circula- 
tion. When  it  is  said  that  the  gale  had  well-nigh  blown 
itself  out  by  the  close  of  1860,  it  is  not  meant  that  the 
production  of  gold  very  greatly  declined  after  that 
period,  though,  in  fact,  it  fell  off  considerably,  owing 
to  the  exhaustion  of  the  richest  of  the  alluvial  deposits ; 
the  average  of  the  next  decade  was,  according  to 
Tooke  and  Newmarch,  almost  precisely  20  per  cent 

every  single  year  from  1803  till  1873,  except  that  in  1872  and  1873 
no  gold  was  coined. 


1 30  BIME  TA  LLISM. 

below  that  of  1851-60.  But  the  storm-centre  had 
passed  by  France.  The  other  countries,  protected  so 
long  by  the  action  of  the  French  bimetallic  system, 
were  now  experiencing  the  effects  of  the  increased  pro- 
duction of  the  precious  metals,  in  a  not  too  tumultu- 
ous manner,  by  gradual  accessions  which  exerted  an 
influence  on  trade,  industry,  and  the  social  struc- 
ture, here  and  there  injurious  to  individuals,  but  on 
the  whole  immensely  beneficial  to  mankind.*  The 
French  breakwater  had  beaten  off  the  fury  of  the 
waves,  but  it  could  not,  and  indeed  it  was  not  desirable 
that  it  should,  prevent  the  level  of  the  harbor  thus 
protected  from  being  gradually  raised. 

In  his  testimony  before  the  Commission  on  Agri- 
culture, in  1894,  Sir  Robert  Giffen  again  referred  to 
the  statistics  of  the  exports  of  silver  from  France  after 
the  gold  discoveries,  and  this  time  in  a  more  dis- 
paraging way,  and  with  an  expression  of  the  opinion 
that  Chevalier  did  not  know  what  he  was  talking  about 
when  he  spoke  of  France  acting  as  a  parachute  to  break 
the  fall  of  gold.  According  to  his  statement  the 
whole  amount  of  silver  with  which  France  parted 
during  twenty  years  was  only  "something  like  fiftyf 

*  Mr.  William  Newmarch,  joint  author  with  Thomas  Tooke  of 
the  great  work  on  the  History  of  Prices,  writing  in  1853,  said  : 
"We  are  justified  in  describing  the  effects  of  the  new  gold  as  al- 
most wholly  beneficial.  .  .  .  It  has  already  elevated  the  condition 
of  the  working  and  poorer  classes  ;  it  has  quickened  and  extended 
trade,  and  exerted  an  influence  which,  thus  far,  is  beneficial 
wherever  it  has  been  felt." 

f  It  will  be  remembered  that,  in  the  paragraph  recently  quoted 
from  his  testimony  before  the  Herschell  Commission,  Sir  R. 
Giffen  spoke  of  the  amount  of  silver  exported  by  France,  in  this 
period,  as  "  only  about  75  millions  sterling." 


FRENCH  BIMETALLISM   TO    1873.  13! 

millions  sterling."  This  Sir  R.  Giffen  deemed  an 
amount  too  small  for  the  effect  generally  attributed  to 
the  operation  of  the  French  monetary  system  in  that 
period.  But  it  is  to  be  observed  that  it  is  not  alone 
the  amount  of  silver  sold  by  France,  but  also  the 
amount  of  gold  bought  by  France,  which  measures 
the  degree  of  her  influence  on  the  market  for  the 
precious  metals.  During  eight  years,  only,  viz.  1853 
to  1860,  France,  as  we  have  seen,  took  3082  million 
francs  in  gold,  diminishing  by  so  much  the  amount  to 
be  offered  elsewhere  for  silver;  and  parted  with  1465 
million  francs  in  silver,  increasing  by  so  much  the 
amount  of  that  metal  to  be  offered  elsewhere  for  gold. 
This  makes  the  total  bullion  operation  amount  to  4547 
million  francs,  or  909  millions  of  dollars,  or  182  million 
pounds  sterling  ! 

THE   LATIN   UNION. 

In  1865,  after  the  first,  and,  from  the  bimetallist 
point  of  view,  the  worst,  of  the  effects  of  the  great 
gold  discoveries  were  over,  the  French  system  was 
apparently  much  strengthened  by  the  formation  of  the 
so-called  Latin  Union,  composed  of  France,  Italy, 
Belgium,  and  Switzerland.  In  the  formation  of  this 
league,  of  whose  objects  and  principles  we  shall  have 
occasion  to  speak  further,  the  initiative  was  taken  by 
Belgium,  for  the  purpose,  it  is  alleged,  of  ultimately 
bringing  about  the  adoption  of  a  gold  standard.*  The 

*  Ques.  "The  Latin  Union  was  not  formed  with  reference  at 
all  to  the  question  as  between  silver  and  gold  ?" — Ans.  "They 
simply  adopted  the  French  currency  of  that  time."  (Evidence  of 


1 3  2  BIME  TA  LLISM. 

Union  did  not  provide,  as  is  usually  stated,  for  the 
free  coinage  of  both  metals;  *  but  it  did  secure  mutual 
faith,  credit,  and  circulation  to  the  uniform  coins  of 
the  consenting  nations. 

I  have  said  that  the  bimetallic  system  of  France  was 
apparently  much  strengthened  by  the  accession  of  the 
other  States  which  have  been  named.  The  re-enforce- 
ment was,  however,  largely  nominal.  Switzerland  was 
a  country  so  small  and  poor,  industrially  and  com- 
mercially, that  it  had  no  mint  of  its  own,  its  coins 
being  manufactured  for  it  by  friendly  nations,  on  con- 
tract. The  industrial,  commercial,  and  financial  char- 
acter of  Belgium  was,  indeed,  of  the  first  order;  but 
with  a  population  of  only  about  five  millions  this 
country  could  not  add  very  greatly  to  the  demand  for 
the  depreciating  metal,  under  any  monetary  strain. 
The  importance  of  Italy  was  such  as  to  promise  a 
powerful  support,  but  the  finances  of  the  kingdom 
were  already  in  a  wretched  condition;  and  the  war 
with  Austria,  which  broke  out  in  the  following  year, 
plunged  Italy  definitively  into  an  abyss  of  inconvert- 
ible paper.  It  is  probable  that  the  other  members  of 
the  Latin  Union  could  together  exert  but  a  fraction 
of  the  influence  upon  the  money  metals  of  which 
France  alone  had  shown  herself  capable. 

Walter  Bagehot  before  the  Committee  on  the  Depreciation  of 
Silver,  1876.) 

See  account  of  the  formation  of  the  Latin  Union.  Report  of 
Committee  on  Depreciation  of  Silver,  1876,  pp.  xxxviii-xl.  See 
pp.  174,  180,  192. 

*  Free  mintage,  however,  existed  through  the  Union,  in  fact, 
through  the  national  regulations  of  the  various  countries. 


FRENCH  BIMETALLISM   TO   1873.  133 

AUTHORITATIVE    ECONOMIC   OPINION. 

I  have  recited  hurriedly  and  rudely  the  story  of  the 
great  gold-storm  at  the  middle  of  the  century.  It 
is  in  contemplating  this  remarkable  experience  that 
economists,  financiers,  and  statesmen,  even  though 
strongly  monometallist  in  their  views  of  the  interests 
of  their  own  countries,  or  even  strongly  monometallist 
in  their  view  of  the  general  interests  of  mankind,  have 
found  themselves  compelled  to  admit  the  entire  validity 
of  the  bimetallic  principle,  both  in  theory  and  in 
practice.  It  will  be  wholesome  to  quote  some  of  the 
opinions  which  have  been  carefully  and  deliberately 
expressed.  I  shall  confine  myself  to  the  statements  of 
men  known  as  monometallists.  Professor  Stanley 
Jevons  says: 

"  As  to  the  equilibrating  action  of  the  double  standard,  no 
one  who  has  inquired  into  the  matter  can  doubt  it  any  more 
than  he  can  doubt  that  one  scale  of  a  balance  will  go  up  when 
the  other  comes  down."  (Money  and  the  Mechanism  of  Ex- 
change, p.  141.) 

"  The  French  currency  law  has  thus  no  doubt  assisted  to  keep 
gold  and  silver  at  a  nearly  invariable  price,  as  compared  one 
with  the  other.  .  .  .  Although  both  gold  and  silver  have, 
I  believe,  suffered  considerable  depreciation,  yet  relatively  they 
have  not  varied  more  than  five  per  cent.  Some  persons  an- 
ticipated that  the  fall  in  the  value  of  gold  would  be  indicated 
by  a  rise  in  the  price  of  silver ;  but  they  overlooked  the  fact 
that  gold  would  spread  itself  into  the  channels  previously  occu- 
pied by  silver."  (Investigations  in  Currency  and  Finance,  p. 

3°4.) 

"  I  quite  concede  to  MM.  Wolowski  and  Cernuschi  that  the 
bimetallic  system  does  spread  fluctuations  of  supply  and  de- 
mand over  a  wider  area.  I  have  tried  to  explain  in  my  book  on 
'  Money  and  the  Mechanism  of  Exchange  'that  gold  and  silver, 


1 34  BIME  TA  LLISM. 

free  from  the  action  of  a  legal  ratio,  are  like  two  unconnected 
reservoirs  of  water,  each  liable  to  be  raised  and  lowered  in  level 
by  various  accidents.  Establish  a  communication  between 
these  reservoirs,  and  then  each  new  supply  spreads  itself  over 
a  double  area,  and  each  new  demand  is  supplied  with  less 
effect  upon  the  general  level.  The  legal  currency  ratio  of  15^ 
to  i  actually  does  establish  a  communication  of  this  sort  be- 
tween the  reservoirs  of  gold  and  silver  in  the  world,  (pp.  310, 
311.)  In  the  latter  part  of  the  last  century  i$i  to  I  correctly 
represented  the  natural  ratio.  For  some  fifty  years  it  was 
held  pretty  steadily  at  this  point  by  the  action  of  the  French 
Currency  law."  (p.  319.) 

Prof.  Henry  Sidgwick,  in  his  "Political  Economy" 
(p.  256),  while  stating  that  variations  of  a  certain  mag- 
nitude cannot  be  counteracted  by  the  bimetallic  sys- 
tem, adds:  "The  adoption  of  a  double  standard  will 
prevent  slight  variations  in  supply  from  affecting  the 
relative  market  value  of  the  two  metals,  as  it  will  tend 
to  produce  changes  in  demand  sufficient  to  absorb 
their  effect." 

Prof.  John  E.  Cairnes,  writing  in  1860,  remarks: 
'  The  crop  of  gold  has  been  unusually  large;  the 
increase  in  the  supply  has  caused  a  fall  in  its  value; 
the  fall  in  its  value  has  led  to  its  being  substituted  for 
silver;  a  mass  of  silver  has  thus  been  disengaged  from 
purposes  which  it  was  formerly  employed  to  serve; 
and  the  result  has  been  that  both  metals  have  fallen  in 
value  together,  the  depth  of  the  fall  being  diminisJied 
as  the  surface  over  which  it  has  taken  place  has  been 
enlarged. ' ' 

Mr.  Bagehot  wrote,  in  September  1876,  after  the 
German  demonetization,  as  follows  regarding  the 
action  of  the  bimetallic  system:  "Whenever  the  value 


FRENCH  BIMETALLISM    TO   1873.  13$ 

of  the  two  metals  altered,  these  countries  [France  and 
her  allies  of  the  Latin  Union]  acted  as  equalizing- 
machines.  They  took  the  metal  which  fell;  they  sold 
the  metal  which  rose ;  and  thus  the  relative  value  of 
the  two  was  kept  at  its  old  point."  I  have  already 
quoted  the  image  of  a  parachute,  presented  by  M. 
Chevalier.  It  occurs  in  the  following  paragraph 
taken  from  his  work,  so  often  cited:  "  If  down  to 
the  present  time  [1857],  the  immense  production,  of 
which  Australia  and  California  have  been  the  theatre, 
has  not  produced  a  greater  fall  in  the  value  of  gold, 
it  is  France  which  is  the  cause.  It  is  she  that  has 
retarded  the  depreciation  of  gold.  She  plays,  in  re- 
lation to  this  metal,  the  part  of  a  parachute."  In 
1888,  the  British  Royal  Commission,  of  which  Lord 
Herschell  was  chairman,  made  up  of  six  bimetallists 
and  six  gold  monometallists — one  of  the  latter  group 
has  since  become  an  advocate  of  bimetallism — unani- 
mously adopted  the  following  statements: 

"  When  we  examine  the  marked  contrast  which  the  period 
prior  to  1873  presents  to  later  periods,  and  the  extensive 
changes  in  the  relative  production  of  the  two  metals  which 
tool?  place  during  the  earlier  period,  it  seems  impossible  to 
conclude  that  the  circumstances  connected  with  the  supply 
sufficiently  account  for  the  altered  conditions  in  the  relative 
value  of  silver  and  gold  since  that  date.  In  the  forty  years  be- 
tween 1833  and  1873,  which  include  the  period  of  the  great  gold 
discoveries,  and  the  consequent  increase  in  the  available  sup- 
ply of  that  metal,  but  little  change  in  the  gold  price  of  silver 
can  be  observed.  In  the  ten  years  from  1831  to  1840,  the  pro- 
portion which  the  value  of  the  silver  produced  bore  to  that  of 
the  gold  was  as  1.86  to  i.  In  the  five  years  from  1851  to 
1855,  the  proportion  had  fallen  to  .288  to  i.  Yet  the  market 
value  of  silver  only  varied  between  15.75  to  i  in  the  former 


1 36  BIME  TA  LLISM. 

period,  and  15.41  to  I  in-  the  latter.  On  the  other  hand,  if  we 
compare  the  five  years  1871  to  1875  with  the  five  years  1876  to 
1880,  we  find  that  the  proportion  borne  by  the  production  of 
silver  to  that  of  gold  was  .710  to  i  in  the  first  period,  and  .794 
to  i  in  the  latter.  But  this  change,  almost  insignificant  when 
compared  with  those  to  which  we  have  called  attention  above, 
coincided  with  a  fall  in  the  market  value  from  15.9710  i  to 
17.81  to  i. 

"  Looking,  then,  to  the  vast  changes  which  occurred  prior  to 
1873  in  the  relative  production  of  the  two  metals,  without  any 
corresponding  disturbance  in  their  market  value,  it  appears 
difficult  to  us  to  resist  the  conclusion  that  some  influence  was 
then  at  work  tending  to  steady  the  price  of  silver,  and  to  keep 
the  ratio  which  it  bore  to  gold  approximately  stable.  .  .  . 
Undoubtedly,  the  date  which  forms  the  dividing  line  between 
an  epoch  of  approximate  fixity  in  the  relative  value  of  gold  and 
silver  and  one  of  marked  instability  is  the  year  when  the  bime- 
tallic system,  which  had  previously  been  in  force  in  the  Latin 
Union,  ceased  to  be  in  full  operation  ;  and  we  are  irresistibly 
led  to  the  conclusion  that  the  operation  of  that  system,  estab- 
lished as  it  was  in  countries  the  population  and  commerce  of 
which  were  considerable,  exerted  a  material  influence  upon  the 
relative  value  of  the  two  metals. 

"  So  long  as  that  system  was  in  force  we  think  that,  notwith- 
standing the  changes  in  the  production  and  use  of  the  precious 
metals,  it  kept  the  market  price  of  silver  approximately  steady 
at  the  ratio  fixed  by  law  between  them,  namely,  15^  to  i.  ... 
Nor  does  it  appear  to  us  a  priori  unreasonable  to  suppose  that 
the  existence,  in  the  Latin  Union,  of  a  bimetallic  system,  with 
a  ratio  of  15^  to  i,  fixed  between  the  two  metals,  should  have 
been  capable  of  keeping  the  market  price  of  silver  steady  at 
approximately  that  ratio.  .  .  ." 

It  would  be  easy  to  continue  the  quotation  of  ex- 
tracts to  the  same  effect  from  economists  and  financiers 
of  the  highest  reputation,  all  disinterested  in  this 
matter,  or,  if  not  so,  then  prejudiced  in  favor  of  gold 
monometallism ;  but  the  matter  has  really  passed  be- 


FRENCH  BIMETALLISM   TO   1873.  I3/ 

yond  controversy.  No  one  worth  citing  denies  that  it 
was,  predominantly,  the  action  of  the  bimetallic  system 
of  France  which  went  so  far  to  control  the  relations  of 
the  two  precious  metals  that,  in  spite  of  the  enormous 
production  of  gold,  in  spite  of  its  demonetization  by 
several  nations,  the  maximum  effect  of  the  Californian 
and  Australian  discoveries  did  not  exceed  4f-  per  cent, 
while  its  permanent  effect  only  reached  i£in  100.  It 
cannot  be  considered  unfair  to  call  the  attention  of 
those  who  have  been  fond  of  speaking  of  silver  as 
something  that  may  become  too  cheap  for  the  princi- 
pal monetary  uses  of  civilized  and  progressive  nations, 
to  the  fact  that,  within  our  own  time,  the  continued 
monetary  use  of  gold  was  seriously  endangered  by  its 
cheapness;  and  that  it  was  silver  which  enjoyed  the 
preference. 

THE   BENEFITS   OF   BIMETALLISM. 

Assuming,  as  we  may  rightly  do,  after  this  demon- 
stration of  the  power  of  the  bimetallic  system,  during 
the  great  crisis  of  1850  to  1860,  both  the  theoretical 
and  the  practical  reasonableness  of  that  system,  let  us 
proceed  to  ask  what  are  the  benefits  to  be  expected 
from  this  source.  The  chief  advantages  of  successful 
bimetallism  may  be  stated  under  three  heads. 

First,  the  establishment  of  an  approximate  Par  of 
Exchange  between  the  gold-using  and  the  silver-using 
nations.  Twenty-five  years  ago,  the  world  might  be 
said  to  be  divided  about  equally  between  these  two 
groups.  The  preponderance  of  per  capita  wealth 
and  of  general  industrial  and  commercial  power  was 


1 38  BIME  TA  LLISM. 

on  the  side  of  the  gold-using  nations;  but,  on  the 
other  hand,  the  preponderance  of  territory  and  popu- 
lation was  enormously  on  the  side  of  the  silver-using 
nations.  As  Mr.  Bagehot  remarked  *:  "It  used  to  be 
said,  until  a  few  years  ago,  that  England  and  Portugal 
were  the  only  countries  where  gold  was  the  standard 
of  value ;  and  there  were  certain  countries  which  had 
a  double  standard,  but  those  were  not  very  many;  and 
all  the  rest  were  silver.  Silver  is  the  normal  currency 
of  the  world;  and  from  a  natural  cause,  because  silver 
is  a  much  cheaper  metal,  and  is  suited  to  those  small 
transactions  which  constitute  the  bulk  of  the  dealings 
of  mankind."  Midway  between  the  silver-standard 
and  the  gold-standard  countries  stood  a  small  group 
of  States  which  had  undertaken  to  mediate  between 
the  two;  to  establish  an  approximate  price  of  silver  in 
terms  of  gold,  of  gold  in  terms  of  silver.  This,  as  we 
have  seen,  was  effective  at  least  so  far  as  to  reduce  the 
fluctuations  of  the  metals  within  a  very  small  range; 
and  thus  to  create  an  approximate  par-of-exchange. 
The  influence  of  such  a  cause  upon  the  world's  trade, 
and,  by  consequence,  upon  the  world's  production, 
could  not  fail  to  be  of  immense  benefit  to  mankind. 
Without  such  a  bimetallic  ' '  link, ' '  trade  between  gold- 
using  and  silver-using  countries  would  necessarily  have 
been  subject  to  frequent  and  often  extensive  fluctua- 
tions in  the  gold  price  of  silver,  or  the  silver  price  of 
gold.  What  this  means  we  have  seen  for  ourselves, 
within  the  past  few  years,  during  which  silver  has  more 
than  once  fallen,  in  relation  to  gold,  in  the  course  of 

*  Report  of  Select  Committee  on  the  Depreciation  of  Silver. 


FRENCH  BIMETALLISM    TO    1873.  139 

a  single  year,*  to  a  greater  extent  than  it  did  during 
the  two  hundred  years  preceding  1873.  Such  fluctua- 
tions in  the  relative  values  of  the  two  money  metals 
continually  involve  international  trade  in  embarrass- 
ment and  disturbances  of  a  most  serious  character; 
and  often  reduce  it  to  mere  gambling.  Without 
some  tie  which  can  hold  the  two  metals  at  least  near 
to  each  other,  during  the  time  between  the  manufac- 
ture and  sale  of  commodities  and  the  receipt  of  the 
proceeds,  the  producer  in  a  gold  country  can  never 
tell  for  how  much  silver  he  must  sell  his  goods  in 
order  to  make  himself  whole  and  perhaps  win  a  profit ; 
the  producer  in  a  silver  country  can  never  tell  for  how 
much  gold  he  must  sell  his  goods  in  order  to  make 
himself  whole  or  perhaps  win  a  profit.  The  range  of 
possible  losses  or  possible  gains  from  this  source  are 
such  as  to  be  altogether  out  of  proportion  to  the  range 
of  the  ordinary  chances  of  industrial  and  commercial 
enterprise.  A  manufacturer,  for  example,  assuming 
for  the  moment  that  the  entire  operation  would  be 
conducted  by  himself,  might  produce  goods  of  the  best 
quality  and  at  a  low  cost ;  the  goods  might  be  of  the 
right  kind,  that  is,  goods  for  which  there  was  a  demand  ; 
he  might  send  them  to  the  right  market,  that  is,  the 
market  where  the  demand  was  at  the  time  most  active ; 


*  Between  1892  and  1893  the  gold  price  of  silver  fell  10.9  per 
cent.  The  maximum  momentary  effect  of  the  gold  discoveries  of 
California  and  Australia  was  less  than  one  half  of  this.  The  fre- 
quency and  extent  of  the  fluctuations  in  Mexican  dollars  and  in 
Indian  exchange  since  1873  are  strikingly  shown  by  M.  Allard, 
the  eminent  Beligian  economist,  Graphiques  de  la 
(t  de  la  £aisft  des  Prix  1850-1892,  $me  Tal>l(au< 


1 40  BIME  TA  LLISM. 

he  might  dispose  of  them  at  a  favorable  price  to  the 
right  persons,  that  is,  to  persons  thoroughly  solvent 
and  responsible ;  and  yet,  in  spite  of  taking  every  one 
of  the  steps,  between  the  beginning  of  the  venture 
and  its  conclusion,  in  the  most  sound  and  judicious 
manner,  a  fall  in  the  value  of  the  money  in  which  he 
was  paid  might,  before  the  proceeds  could  be  brought 
home,  strip  him  of  his  anticipated  profit  and  even 
involve  him  in  a  loss,  perhaps  a  serious,  possibly  a 
fatal,  loss. 

I  cannot,  in  this  connection,  adequately  express  my 
admiration  for  the  intellectual  courage  of  the  leading 
gold  monometallists  of  the  United  States,  who  have 
treated  this  consideration  as  if  it  were  of  the  very 
slightest  consequence.  Nearly  every  one  of  these  men 
took  part  in  the  discussion  of  the  questions  arising 
out  of  the  issue  of  greenbacks  by  the  United  States 
Government,  during  the  war,  and  the  continued  incon- 
vertibility of  our  paper  money,  down  to  about  1879. 
In  that  connection  they  declared  that  the  loss  of  a 
par-of-exchange  with  other  nations  was  a  monstrous 
evil;  that  it  profoundly  disturbed  home  production; 
that  no  anticipated  benefits  could  possibly  compensate 
for  the  fact  that  our  money  was  not  at  a  par  with  the 
money  of  the  outside  world,  either  as  to  silver  or  as  to 
gold;  that  no  effort  and  no  sacrifice  should  for  a 
moment  be  considered  as  standing  in  the  way  of  instant 
and  strenuous  efforts  to  repair  the  broken  par-of- 
exchange.  And  yet  not  one  of  these  leaders,  so  far 
as  my  reading  has  extended,  has  ever  given  anything 
like  a  fair  statement  of  the  evils  arising  from  the  de- 
struction of  a  par-of-exchange  between  the  silver-using 


FRENCH  BIMETALLISM   TO    1873.  14! 

and  the  gold-using  groups  of  nations;  while  their 
general  tone,  in  discussing  this  subject,  when  they 
allude  to  it  at  all,  is  invariably  one  of  disparagement 
and  even  contempt. 

The  answer  which  the  gold  monometallists  cf  the 
United  States  most  commonly  make,  so  far  as  they 
deign  to  make  any,  to  the  argument  in  favor  of 
a  par-of-exchange  between  the  two  halves  of  the 
commercial  world,  is,  in  brief,  that  what  one  person 
may  lose  by  such  fluctuations  in  the  relative  values  of 
the  two  money  metals,  some  other  person  will  gain. 
Bimetallists  have  often  been  taunted  with  being  men 
of  theory ;  but  it  may  confidently  be  said  that,  in  their 
wildest  imaginings  as  to  the  possible  benefits  of  inter- 
nationalism in  money,  no  thought  so  unreal  and  so 
impracticable  as  this  has  ever  occurred.  It  may  be 
doubted  whether  the  world  has  any  use,  at  all,  for  that 
sort  of  political  economy.  It  is  not  always  true  that 
what  one  man  loses  in  production  and  trade  another 
man  gains.  There  is  a  vast  field  of  economic  relations, 
within  which  occur  gains  which  no  man  loses,  and 
losses  which  no  man  gains.  If  the  theory  of  political 
economy  has  made  any  advance  during  the  last  thirty 
years,  it  is  in  no  direction  more  conspicuously  than 
through  the  recognition  of  this  principle ;  and  the  carry- 
ing of  it  out  to  the  problems  of  taxation,  of  wages, 
of  finance,  and  of  trade.  And  even  throughout  the 
whole  body  of  those  cases  where  some  one  does  actu- 
ally gain,  to  the  full  extent,  what  some  other  loses,  it 
is  still  unquestionably  true  that  unearned  gains  never 
benefit  the  recipient  to  an  extent  which  compensates 
for  the  undeserved  losses  which  others  suffer.  It  is 


142  BIMETALLISM. 

true  that,  in  gambling,  what  one  loses  some  other 
gains;  but  is  it  possible  for  any  student  of  economics 
and  of  social  philosophy  to  doubt  that  the  gains  thus 
derived  profit  little,  even  if  they  do  not  turn  to  a 
curse,  while  the  losses  incurred  are  all  hopeless  and 
irremediable?  Suppose  a  bridge  which  has  formerly 
connected  two  important  cities,  separated  by  a  diffi- 
cult and  dangerous  stream,  to  be  destroyed  by  flood 
or  by  fire.  Is  it  true  that  whatever  one  of  these  cities 
loses  the  other  will  gain?  On  the  contrary,  both  will 
suffer  and  surfer  deeply,  although  the  loss  may  be 
greater  in  the  case  of  one  than  in  that  of  the  other. 
Such  a  bridge  was  the  bimetallic  system.  In  the  place 
of  a  transport,  always  costly,  always  difficult,  always 
doubtful,  often  dangerous,  sometimes  impossible,  it 
offered  an  easy,  swift,  and  sure  passage  from  one  shore 
to  the  other.  Is  it  possible  that  in  this  age  any  man 
should  question  that  such  a  system  would  not  only 
confer  a  general  benefit,  but  would  strengthen  and 
enrich  every  people  and  country,  by  turns  ? 

In  the  Report  of  the  Herschell  Commission  of  1888, 
it  was  to  be  expected  that  the  bimetallists  of  that 
body  should  place  a  great  deal  of  weight  upon  the  evil 
effects  which  the  destruction  of  the  bimetallic  system 
had  wrought  in  inducing  such  fluctuations  in  the 
values  of  the  precious  metals  as  have  been  described. 
In  the  view  of  this  half  of  the  Commission,  comprising 
men  of  the  largest  commercial  and  financial  knowledge 
and  experience,  those  ill  effects  had  been  of  enormous 
extent,  going  far  to  explain  the  unprecedented  distress 
and  embarrassment  from  which  trade  and  industry  had 
suffered  since  1873.  I  prefer,  however,  to  make  my 


FRENCH  BIMETALLISM   TO   1873.  H3 

quotations  from  the  separate  report  of  the  six  gold 
monometallists  of  the  Commission.  These  gentlemen 
sought  to  show  that  the  disasters  and  disturbances 
naturally  resulting  to  commerce  and  production  from 
this  source  might,  to  a  great  extent,  be  avoided  by 
telegraphic  transfers,  and  by  arrangements  made  for 
the  sale  of  Eastern  silver  at  the  very  moment  when 
the  sale  of  goods  took  place.  This  is  perfectly  true: 
the  English  merchant,  for  example,  dealing  with  India, 
can,  to  a  considerable  degree,  insure  himself  against 
such  losses,*  just  as  the  manufacturer  can  insure  him- 
self against  fire,  and  as  the  shipper  can  insure  himself 
against  the  loss  of  his  vessels  at  sea.  But  it  almost 
speaks  for  itself,  first,  that  the  very  necessity  of  such 
operations  interposes  delays,  efforts,  and  expenses 
which  are  a  burden  upon  commerce,  whose  first  law  is 
freedom  and  instantaneousness  of  action ;  next,  that 
insurance  of  this  kind,  like  every  species  of  insurance, 
has  to  be  paid  for;  finally,  that  a  large  part  of  the 
operations  of  international  trade  cannot,  in  the  absence 
of  a  bimetallic  system,  be  brought  under  any  such  safe- 
guard. All  these  things  the  monometallists  of  the 
Herschell  Commission  acknowledge.  I  quote  their 
words  with  respect  to  the  evils  resulting  from  fluctua- 
tions in  the  relative  values  of  the  two  money  metals: 

"  The  most  obvious  of  these  is  the  inconvenience  which  arises 
in  the  exchange  between  gold-using  and  silver-using  coun- 

*  We  are  speaking  now  of  the  exporter.  But  the  producer  can 
in  no  way  insure  himself  against  the  fluctuations  which  may  oc- 
cur while  his  production  is  going  on  :  during  the  period  between 
the  time  when  he  buys  his  materials  and  hires  his  labor  and  bor- 
rows his  capital,  and  the  time  when  he  sells  his  goods. 


144  BIME  TA  LLISM, 

tries.  This  is  no  doubt  reduced  to  a  minimum  by  the  action 
of  exchange  banks  and  telegraphic  transfers.  Where  the  cur- 
rents of  trade,  in  opposite  directions,  between  the  two  coun- 
tries are  more  or  less  constant  and  uniform,  the  risk  to  the 
exchange  banks  in  undertaking  these  transactions  is  but  small, 
however  frequent  the  fluctuations.  They  are  therefore  able 
and  willing  to  undertake  them  without  any  very  burdensome 
cost  to  the  trader.  Where,  however,  the  counter-currents  of 
trade  are  less  constant,  as  is  said  to  be  the  case  between  this 
country  and  China,  the  burden  imposed  on  commerce  is,  no 
doubt,  at  times,  somewhat  greater.  It  must  be  borne  in  mind 
that  the  fluctuations  in  exchange,  even  in  a  single  day,  have,  of 
late  years,  often  been  considerable;  and,  inasmuch  as  it  is  not 
always  possible  to  close  the  transaction  on  both  sides,  and 
make  the  settlement  of  the  exchange  simultaneously,  some  risk 
to  the  merchant  is  at  times  inevitable.  Besides  this,  it  is  said 
that  the  exchange  difficulty  tends  to  limit  trade,  and  to  restrict 
it  to  those  cases  in  which  a  contract  of  sale  and  purchase  can  be 
made  in  the  two  countries  at  the  same  time.  ...  It  must  also 
be  remembered  that  there  are  certain  risks  which  arise  from, 
or  are  aggravated  by,  the  fluctuations  of  exchange,  and  against 
which  a  merchant  cannot  practically  protect  himself  by  any  of 
the  expedients  to  which  we  have  referred.  Obstacles,  for  ex- 
ample, sometimes  arise  to  prevent  a  contract  being  carried  out 
at  the  appointed  time  ;  and  there  are  cases  in  which  this  would 
be  of  comparatively  little  moment  if  the  exchange  were  stable, 
but  in  which  the  merchant  may  be  subjected  to  a  serious  loss 
if,  with  a  heavy  fall  of  exchange  in  the  meantime,  the  purchaser 
is  enabled  to  refuse  to  receive  the  goods." 

Again,  these  Commissioners  say: 

"  However  much  opinions  may  differ  as  to  the  extent  of  the 
evil  arising  from  the  increased  difficulty  which  a  fluctuating 
exchange  interposes,  we  do  not  think  its  reality  is  open  to 
question.  We  are  not  ourselves  disposed  to  regard  it  as 
having  hitherto  limited  or  burdened,  to  any  very  serious  ex- 
tent, the  commerce  between  this  country  and  those  having  a 
silver  standard.  Nevertheless,  everything  which  hampers  com- 


FRENCH  BIMETALLISM   TO   1873-  *45 

plete  freedom  of  commercial  intercourse  between  two  coun- 
tries, or  which  imposes  on  it  any  additional  burden,  is  un- 
doubtedly an  evil  to  be  avoided,  or  removed  if  possible."  (pp. 
61,  62.) 

In  this  connection  I  quote  three  further  statements 
regarding  the  effects  of  fluctuations  in  the  value  of  the 
two  metals  upon  international  trade.  The  first  is  from 
Sir  Louis  Mallet,  in  his  separate  report  from  the 
Herschell  Commission.  The  second  is  from  M.  Monte- 
fiore  Levi,  President  of  the  Brussels  Conference  of 
1892;  the  third,  from  M.  Leon  Say,  formerly  Finance 
Minister  of  France,  and  President  of  the  Conference 
of  1878.  Sir  Louis  Mallet,  whose  pre-eminent  repu- 
tation for  knowledge  and  experience,  in  matters  com- 
mercial and  financial,  commands  universal  confidence, 
says: 

"  I  desire  to  express  very  distinctly  the  opinion  that  I 
attach  far  more  importance  to  the  injurious  effects  of  constant 
fluctuations  in  their  relative  value,  in  imparting  a  character  of 
uncertainty  and  insecurity  to  the  international  exchanges  be- 
tween gold-  and  silver-using  countries,  than  to  a  mere  alter- 
ation in  their  relation  to  each  other,  in  one  form  or  other, 
whether  by  a  rise  or  fall  of  either  metal."  (p.  125.) 

M.  Montefiore  Levi's  statement  is  as  follows: 

"  The  principal  evil  of  the  present  situation  lies  in  the  insta- 
bility that  results  from  it.  How  would  it  be  possible  for  the 
merchant  or  the  manufacturer  to  make  with  safety  contracts 
extending  over  a  long  period,  as  important  business  operations 
generally  do,  if  the  shrewdest  judgments  and  the  best-founded 
calculations  might  at  any  moment  be  upset  by  a  sudden  move- 
ment of  the  money  market  ?  There  is  no  need,  we  believe,  to 
look  elsewhere  for  the  cause  of  the  noticeable  falling  off  which 
has  taken  place  in  international  transactions.  The  hesitation 
which  checks  all  great  enterprises,  and  which  paralyzes  many 


146  BIMETALLISM. 

markets,   is  the  direct  consequence  of  the    instability  in  the 
price  of  silver  as  compared  with  gold." 

M.  Say  remarks  (Preface  to  third  edition  of 
Goschen's  "  Foreign  Exchanges  "): 

"Although,  in  1861,  silver,  in  England,  and  gold,  in  Ham- 
burg, were  simple  commodities,  there  existed  a  guaranty  against 
variations  in  their  relative  value.  This  guaranty,  not  less  real 
because  indirect,  was  that  which  France,  and,  after  1865,  the 
Union  of  the  four  Latin  powers,  France,  Belgium,  Switzerland, 
and  Italy,  had  given  to  the  entire  world,  not  less  truly  than  to 
their  own  citizens,  through  the  establishment  of  their  mone- 
tary system.  .  .  .  Calonne's  arrangement,  reaffirmed  by  the 
law  of  the  7th  Germinal,  an.  XI,  allowed  all  countries,  alike 
those  using  gold  and  those  using  silver,  for  nearly  a  century, 
to  maintain  monetary  relations  among  themselves  which  con- 
duced to  freedom  of  commercial  intercourse  and  rendered  sim- 
ple the  payment  of  international  balances,  without  any  serious 
trouble  in  the  foreign  exchange  except  such  as  resulted  from 
emissions  of  paper  money." 

I  will  only  make  one  more  quotation,  and  that  from 
Mr.  W.  A.  Shaw,  author  of  the  "  History  of  Cur- 
rency," whom  American  monometallists  have  been 
very  fond  of  quoting.  In  his  "Proposal  for  a  System 
of  International  Money,"  Mr.  Shaw  writes  as  follows: 

"  The  abolition  of  free  coinage  has  thrown  that  international 
system  out  of  joint  by  limiting  the  resort  and  employment  of 
one  of  the  two  precious  metals,  and  has  thus  given  a  blow  to 
that  theory  of  international  trade  which  has  established  itself 
as  the  result  of  centuries  of  development,  and  which  we  are 
bound  at  all  costs  to  maintain  and  not  overthrow.  The  blow 
to  this  theory  and  practice  of  international  trade  has  come,  and 
must  increasingly  come,  from  the  monometallic  system.  We 
are  undoing  the  constructive  work  of  centuries.  Monometal- 
lism has  partially  destroyed  one  prime  postulate  of  interna- 
tional trade,  namely,  freedom  of  employ  and  minting  of  the  pre- 


FRENCH  BIMETALLISM  TO  1873.  147 

cious  metals,  and  it  is  equally  tending  to  destroy  the  other 
prime  postulate,  namely,  freedom  of  trade,  and  that  by  means 
of  the  exchange  difficulty.  By  the  two  combined  causes  we 
are  unbinding  or  unloosing  a  real  international  system,  one 
which  bound  the  whole  world  in  one  completed  circle,  and  we 
are  thereby  reversing  and  letting  slip  all  the  course  and  advan- 
tage of  the  centuries  of  development  which  it  has  taken  to 
build  that  system.  If  the  present  situation  of  the  currency 
question  continues  for  a  century,  it  will  sever  the  world  into 
two  completely  independent  and  non-communicating  circles, 
silver-using  East  and  gold-using  West.  The  East  will  go  its 
own  way,  and  the  West  will  be  left  to  reconstruct  its  shattered 
system,  how  and  with  what  friction  and  loss  it  may.  .  .  .  The 
whole  development  of  six  centuries  of  painful  endeavor  and 
experience,  as  far  as  relates  to  commerce,  is  rendered,  or  is 
increasingly  in  danger  of  being  rendered,  nugatory.  It  is  on 
this  latter  point  that  the  main  stress  of  the  argument  against 
monometallism  rests." 

We  have  dwelt  too  long  upon  the  first  of  the  advan- 
tages which  may  be  looked  for  from  the  successful 
establishment  and  maintenance  of  a  bimetallic  system, 
namely,  the  creation  of,  at  least,  an  approximate  par- 
of-exchange  between  gold-using  and  silver-using  na- 
tions. The  second  advantage  to  be  anticipated  from 
this  course,  if  not  of  equal,  is  of  very  great  importance, 
namely,  the  securing  of  a  higher  degree  of  stability  in 
the  compound  mass  of  the  money  thus  formed  than 
could  possibly  exist  with  the  two  metals  separate  and 
independent  in  their  value  movements.  There  is  an 
important  difference  between  this  subject  and  the  one 
with  which  we  have  just  been  dealing.  The  beneficial 
effects  of  a  par-of-exchange  between  gold-using  and 
silver-using  countries  would  be  equally  experienced  if 
both  gold  and  silver  were  at  the  same  time  rising  or 


1 48  JBIME  TA  LL1SM. 

falling,  each  according  to  the  influences  bearing  upon 
it  separately.  The  advantage  we  are  now  to  contem- 
plate would  be  experienced  at  all  times ;  but  would 
be  at  its  maximum  at  a  time  when  one  of  the  metals 
was  rising  and  the  other  falling.  It  would  be  equally 
of  benefit  to  trade  between  two  gold-using  nations  and 
two  silver-using  nations ;  and  would  be  equally  of  bene- 
fit to  internal  and  to  external  commerce.  In  a  word,  the 
object  sought  is  to  make  money  everywhere  a  better 
standard  of  deferred  payments  than  it  can  be  when  it 
consists  of  one  metal  alone.  It  is  with  reference  to 
this  aspect  of  bimetallism  that  Prof.  Laughlin  says 
("  History  of  Bimetallism  In  the  United  States,"  p. 
xi) :  "  Its  chief  end  is  to  secure,  as  its  advocates 
claim,  a  less  changeable  standard  for  paying  long  con- 
tracts." 

Whether  or  not  this  aim  of  bimetallism  is  more  im- 
portant than  that  of  securing  a  par-of-exchange  between 
the  two  halves  of  the  commercial  world,  it  is  certainly, 
in  the  view  of  all  bimetallists,  of  very  great  impor- 
tance. That  importance  arises  chiefly  from  the  fact 
that  the  production  of  the  precious  metals  has  always 
been  of  a  highly  spasmodic  and  often  intermittent 
character.  We  have  already  seen  this,  in  our  brief 
and  hurried  narration  of  the  several  epochs  of  mone- 
tary history.  Now  it  is  gold  which  rises  and  swells  in 
volume,  as  fresh  fields,  of  vast  extent  and  richness,  are 
discovered;  now  it  is  silver  which  pours  in  mighty 
floods  from  the  newly  opened  mines  of  Potosi  or  of 
Nevada.  Even  during  our  own  century,  several  of 
these  great  changes  in  the  comparative  production  of 
the  two  metals  have  taken  place.  If,  then,  each  metal 


FRENCH  BIMETALLISM   TO   1873.  149 

has  its  value  in  commerce  subject  to  the  natural  causes 
which  affect  the  supply  and  to  the  commercial  causes 
which  govern  the  demand,  it  is  evident  that  we  shall 
have  an  incessant  fluctuation,  not  only  in  the  relation 
between  the  two  metals,  but  also  in  the  relation  of 
metal  money  to  prices.  Such  fluctuations  cannot,  in 
the  nature  of  the  case,  be  suppressed ;  but  if  the  two 
metals  can  somehow  be  joined  together  in  their  func- 
tion as  money,  it  is  highly  reasonable  to  expect  that 
the  aggregate  influence  of  fluctuations  in  price  will  be 
reduced.  There  will  be,  on  the  whole,  as  things  are 
likely  to  go,  a  considerable  compensating  effect,  giving 
the  result  of  a  greater  degree  of  steadiness  in  values. 
Whenever  one  metal  tends  to  fall  and  the  other  to 
rise,  or  where  both  tend  to  rise  or  to  fall  with  different 
degrees  of  rapidity,  the  operation  of  the  bimetallic 
system  must  be  in  the  direction  indicated.  This  point, 
notwithstanding  its  importance,  need  not  occupy  much 
of  our  time.  The  principle  has  been  fully  recognized 
by  writers  on  money.  In  his  very  valuable  work, 
entitled  "  Money  and  the  Mechanism  of  Exchange," 
Professor  Jevons  has  offered  a  discussion  of  the  prin- 
ciple which  governs  in  this  matter,  reaching  the  result 
I  have  stated.  You  will  recall  his  illustration  with 
respect  to  two  reservoirs  of  water,  each  of  which  has 
its  own  source  of  supply  and  its  own  causes  of  exhaus- 
tion, between  which  a  connecting  pipe  is  placed. 
Thereafter,  whichever  be  more  rapidly  fed  or  be  more 
rapidly  drawn  upon,  the  water  will  stand  in  the  two 
at  a  level.  It  is  not  necessary  to  further  pursue  the 
question  in  this  place.  If  the  reader  is  interested  to 
see  the  subject  treated  with  a  high  degree  of  mathe- 


1 50  BIME  TA  LLISM. 

matical  precision,  he  may  consult  the  very  able  paper 
of  Dr.  Irving  Fisher,  of  Yale  University,  read  at  the 
Oxford  Meeting  of  the  British  Association  for  the 
Advancement  of  Science,  in  1894.  This  paper  has 
attracted  wide  attention,  on  account  of  its  clearness, 
precision,  and  force  of  reasoning.  References  to  Prof. 
Fisher's  paper,  and  a  further  mathematical  discussion 
of  the  subject,  will  be  found  in  an  article  by  Prof.  F. 
Y.  Edgeworth,  of  Oxford  University,  in  the  Economic 
Journal  for  September,  1895. 

Such  are  the  two  great  standing  arguments  for^ 
bimetallism.  It  will  be  observed  that  they  are  entirely 
independent  of  THE  ARGUMENT  FROM  THE  STATUS, 
which  has  played  so  large  a  part  in  the  controversial 
literature  of  the  last  twenty-two  years;  the  argument, 
that  is,  drawn  from  the  facts  of  pnces,  wages,  and 
debts,  as  they  existed  at  the  time  01  the  demonetiza- 
tion* of  silver,  or  at  any  intermediate  period.  The 
two  arguments  which  have  now  been  stated  had  both 
been  clearly  and  fully  set  forth,  by  eminent  writers, 
before  the  great  Fall  in  Prices  began.  They  will  still 
hold,  and  will  constitute  a  powerful  plea  for  the 
rehabilitation  of  the  broken  bimetallic  system,  even 
should  the  new  South  African  gold-fields  prove  far 
richer  than  any  one  now  imagines,  and  the  new  cyanide 
process  of  reduction  -prove  so  effective  as  again  to  bring 

*  Some  monometallist  writers  are  very  much  distressed  by  the 
use  of  this  term,  inasmuch  as  large  amounts  of  silver  are  still 
used  as  money  in  Europe.  Not  the  less  is  the  term  demonetiza- 
tion of  silver  properly  applied  to  the  series  of  measures  by  which 
that  metal  was  denied  free  coinage,  and  was  either  reduced  to 
become  the  material  of  fractional  money  solely,  or  was  allowed 
to  be  coined  only  in  limited  quantity. 


FRENCH  BIMETALLISM    TO    1873.  I$I 

gold  to  the  verge  of  a  catastrophe,   like  that  which 
threatened  it  in  1853. 


THE   INFLUENCE   OF    METALLIC    INFLATION. 

I  have  spoken  of  the  general  influence  of  the  great 
production  of  gold,  after  1850,  upon  trade,  industry, 
and  society,  as,  on  the  whole,  in  spite  of  individual 
cases  of  hardship,  highly  beneficial.  The  metallic 
inflation  was  most  welcome,  for  it  occurred  at  a  time 
when  commerce  and  production  had  for  a  long  time 
been  suffering  from  a  money-supply  either  positively 
decreasing,  or,  at  any  rate,  not  keeping  up  with  the 
world's  needs  in  this  respect.  The  age  had  been  one 
of  falling  prices,  with  loud  complaints,  everywhere,  of 
depression  in  trade  and  failure  of  employment.  Never 
did  parched  ground  respond  more  joyously  to  the  first 
fall  of  rain  after  a  long  drought,  than  industry  and  trade 
responded  to  the  new  supplies  of  gold  from  California 
and  Australia.  The  normal  effects  of  an  inflation  of 
the  money-supply  of  the  world  due  to  natural  causes, 
and  not  to  any  purposed  action  of  government  in 
tampering  with  the  standard  of  deferred  payments,  has 
been  studied  by  some  of  the  soundest  and  wisest  of 
economists;  and  the  general  weight  of  their  testimony 
bears  strongly  on  the  side  of  the  advantages  derived 
from  such  a  cause.  A  natural  metallic  inflation  carries 
with  it  no  sting  of  injustice  and  draws  no  retribution 
after  it,  for  it  is  due  either  to  the  discovery  of  new 
resources  in  nature  or  to  improvements  in  human  arts. 
Being,  thus,  free  from  the  curse  which  attends  an 
increase  of  paper  money  designed  to  scale  down  debts 


1 52  BIME  TALLISM. 

and  alter  the  standard  of  value,  such  an  inflation  can 
be  looked  at  without  prejudice.  The  subject  is  one 
susceptible  of  great  exaggeration.  It  is  also  one  which 
may  be  treated  in  a  small  and  grudging  way,  with 
results  as  distinctly  false  to  life  as  any  that  could  be 
due  to  extravagance  of  view  and  of  statement.  The 
truth  doubtless  lies  between  the  extreme  claims  of 
some,  who  have  attributed  more  than  a  magical,  an 
even  miraculous,  virtue  to  a  natural  increase  of  the 
money-supply,  and  the  mean  and  parsimonious  admis- 
sions of  certain  economists  of  the  b,  priori  order.  But 
I  believe  that  the  truth  lies  much  nearer  the  former 
than  the  latter  line.  The  weighty  argument  of  David 
Hume  is  the  first  which  should  be  quoted  in  any  dis- 
cussion of  this  subject. 

"  It  is  certain  that,  since  the  discovery  of  the  mines  in  Amer- 
ica, industry  has  increased  in  all  the  nations  of  Europe,  except 
in  the  possessors  of  those  mines  ;  and  this  may  be  justly  as- 
cribed, amongst  other  reasons,  to  the  increase  in  gold  and 
silver.  Accordingly  we  find  that,  in  every  kingdom  into  which 
money  begins  to  flow  in  greater  abundance  than  formerly, 
everything  takes  a  new  face;  labor  and  industry  gain  life  ;  the 
merchant  becomes  more  enterprising,  the  manufacturer  more 
diligent  and  skilful,  and  even  the  farmer  follows  his  plow  with 
greater  alacrity  and  attention.  .  .  .  To  account,  then,  for  this 
phenomenon,  we  must  consider  that,  though  the  high  price  of 
commodities  be  a  necessary  consequence  of  the  increase  of  gold 
and  silver,  yet  it  follows  not  immediately  upon  that  increase  ; 
but  some  time  is  required  before  the  money  circulates  through 
the  whole  state  and  makes  its  effects  to  be  felt  on  all  ranks  of 
people.  At  first  no  alteration  is  perceived  ;  by  degrees  the 
price  rises,  first  of  one  commodity  and  then  another,  till  the 
whole  at  last  reaches  a  just  proportion  with  the  new  quantity 
of  specie  which  is  in  the  kingdom.  In  my  opinion  it  is  only 
jn  th>s  interval,  or  intermediate  situation,  between  the  acqui- 


FRENCH  BIMETALLISM   TO    1873.  153 

sition  of  money  and  rise  of  prices,  that  the  increasing  quantity 
of  gold  and  silver  is  favorable  to  industry.  When  any  quantity 
of  money  is  imported  into  a  nation,  it  is  not  at  first  dispersed 
into  many  hands,  but  is  confined  to  the  coffers  of  a  few  persons, 
who  immediately  seek  to  employ  it  to  advantage.  .  .  .  It  is  easy 
to  trace  the  money  in  its  progress  through  the  whole  common- 
wealth, where  we  shall  find  that  it  must  first  quicken  the  dili- 
gence of  every  individual  before  it  increases  the  price  of  labor." 
(Essay  on  Money.) 

In  the  foregoing  remarks,  Hume  understates  the 
advantages  of  a  metallic  inflation.  In  addition  to  all 
which  he  alleges,  there  is  the  important  consideration 
of  the  effect  of  such  a  cause  upon  the  burden  of  exist- 
ing indebtedness,  both  public  and  private.  The  world 
is  always  in  bonds  to  the  generations  that  have  pre- 
ceded. The  industry,  the  activity,  the  enterprise,  of 
the  generation  upon  the  stage  are  heavily  weighted  by 
obligations  to  the  past.  These  obligations  cannot  be 
repudiated,  they  cannot  be  intentionally  lightened  by 
act  of  government  under  impulse  from  the  debtor 
class,  without  social  and  economic  retributions  which 
will  produce  a  mischief  far  outweighing  any  benefits 
which  may  be  in  view  in  such  ill-advised  measures. 
But  when  this  effect,  in  no  revolutionary  degree,  is 
brought  about  by  natural  means,  I  believe  it  to  be 
wholly  beneficial.  That  the  great  silver  discoveries  of 
the  sixteenth  and  seventeenth  centuries,  diminishing 
the  weight  of  feudal  burdens,  cutting  down  the  effec- 
tive revenues  of  existing  dynasties,  and  reducing  the 
weight  of  obligations  derived  from  the  past,  had  an 
influence,  wholly  in  addition  to  that  mentioned  by 
Hume,  not  only  in  extending  commercial  activity,  but 
in  lifting  society  and  industry  up  to  a  new  and  higher 


154  BIMETALLISM. 

plane,  seems  beyond  question.  To  show  that  this 
view  is  not  without  the  support  of  recognized  eco- 
nomic authority,  I  quote  the  language  of  M.  Cheva- 
lier, the  first  of  French  economists,  and  of  J.  R. 
McCulloch,  one  of  the  most  conservative  of  the 
English  school. 

M.  Chevalier  says:  "  Such  a  change  will  benefit 
those  who  live  by  current  labor;  it  will  injure  those 
who  live  upon  the  fruits  of  past  labor,  whether  their 
fathers'  or  their  own.  In  this  it  will  work  in  the  same 
direction  with  most  of  the  developments  which  are 
brought  about  by  that  great  law  of  civilization  to  which 
we  give  the  noble  name  of  progress."  Mr.  McCulloch 
has  perhaps  taken  even  stronger  ground.  He  declares 
that,  ''while,  like  a  fall  of  rain  after  a  long  course  of 
dry  weather,  it  may  be  prejudicial  to  certain  classes,  it 
is  beneficial  to  an  incomparably  greater  number,  in- 
cluding all  who  are  actively  engaged  in  industrial 
pursuits,  and  is,  speaking  generally,  of  great  public  or 
national  advantage."  With  reference  to  this  state- 
ment of  Mr.  McCulloch,  Prof.  Jevons  (1863)  remarks: 
"  I  cannot  but  agree  with  McCulloch  that,  putting  out 
of  sight  individual  cases  of  hardship,  if  such  exist,  a  fall 
in  the  value  of  gold  must  have,  and  I  should  say  has 
had  already,  a  most  powerfully  beneficial  effect.  It 
loosens  the  country,  as  nothing  else  could,  from  its 
old  bands  of  debt  and  habit.  It  throws  increased 
rewards  before  all  who  '  are  making  and  acquiring 
wealth,  somewhat,  at  the  expense  of  those  who  are 
enjoying  acquired  wealth.  It  excites  the  active  and 
skilful  classes  of  the  community  to  new  exertions." 
(Investigations  in  Currency  and  Finance,  pp.  96,  97.) 


CHAPTER   VI. 

DEMONETIZATION. 

IN  1867,  Napoleon  III.  summoned  all  nations  and 
peoples  to  contemplate  and  admire  the  mighty  capital 
which  he  had  built.  Among  the  features  of  the 
International  Exposition,  which  was  intended  to  illus- 
trate the  glory  of  the  Second  Empire  and  to  demon- 
strate its  predominant  influence  over  the  politics  of 
Europe,  was  a  Conference,  called  by  France,  to 
consider  the  world-wide  Unification  of  Coinage.  For 
some  years  previous,  there  had  been  a  certain  specu- 
lative interest  in  this  question.  There  were  in  every 
land  a  few  men  who  devoted  themselves  to  the  propa- 
ganda for  international  money.  Unification  of  coinage 
had  become  somewhat  of  "  a  fad"  with  a  class  of 
writers.  At  the  present  time  there  is  not  a  tenth 
part  as  much  regard  for  the  subject  as  there  was  thirty 
years  ago.  Who  troubles  himself,  to-day,  about  the 
unification  of  moneys  ?  In  part,  this  decline  of  in- 
terest is  due  to  the  fact  that  the  political  consolidation 
of  Germany  and  of  Italy  removed  no  inconsiderable 
share  of  the  grievances  of  which  travellers  had  been 
accustomed  to  complain,  arising  from  the  great  diver- 
sity of  currencies  with  which  they  were  confronted  on 


BIME  TA  LLISM. 

even  a  short  tour.*  In  greater  part,  the  result  is  due 
to  the  apprehension,  by  the  public  mind  of  Europe 
and  America,  of  the  idea  that  what  the  world  wants 
is,  not  international  coins,  but  an  international  stand- 
ard of  value.  The  thoughtful  remarks  which,  in  a 
previous  chapter,  were  quoted  from  Prof.  Foxwell,f 
regarding  the  importance  of  the  external  valuation  of 
currencies,  as  distinct  from  the  problem  of  their 
internal  parity,  apply  with  much  force  to  this  change 
of  public  sentiment.  But,  as  has  been  said,  for  some 
years  before  1867  there  had  been  not  a  little  discussion 
of  the  question  of  international  coinage;  and  occa- 
sion was  taken  of  the  holding  of  the  great  Exposi- 
tion to  assemble  representatives  of  the  leading  powers 
to  consider  this  subject.  Twenty  states  responded  to 
the  call,  counting  as  two  Norway  and  Sweden,  though 
under  a  common  crown ;  and  were  present  by  dele- 
gates, some  of  high  intellectual  rank.  The  Conference 
had  not  proceeded  far  before  it  came  to  be  acknowl- 
edged that  no  successful  result  could  be  reached  unless 
one  or  the  other  of  the  two  precious  metals  were  to  be 
sacrificed.  At  this  point,  the  best  thing  the  Confer- 
ence could  have  done  was  to  adjourn,  sine  die,  leaving 
its  members,  severally  or  in  groups,  to  remain  awhile, 
see  the  Exposition,  buy  some  things  for  their  families, 
and  then  go  home  and  report  to  their  respective 

*  "  Twenty  years  ago  each  of  the  Swiss  Cantons  actually  had 
such  separate  coinage  ;  and,  what  was  worse,  the  coins  of  the 
same  name  and  much  the  same  look  had  different  values  in  ad- 
joining cantons.  Batzen  were  one  thing  here  and  another  there." 
(Bagehot,  A  Universal  Money,  p.  16, 

"t  PP-  ^J-6' 


DEMON E  TIZA  TION.  1 5  7 

governments.  But  whether  it  was  out  of  a  shrinking 
from  such  "a  lame  and  impotent  conclusion,"  and  a 
desire  still  to  do  something,  or  seem  to  do  something, 
or  whether  it  was  out  of  complaisance  to  the  Emperor, 
the  Conference  went  forward,  though  in  a  changed 
direction;  and  addressed  itself  to  the  problem  of  an 
international  coinage  upon  the  basis  of  a  single  metal. 
It  is  impossible  to  believe  that  many  of  the  delegates 
could  have  taken  this  seriously.  Certainly,  some  of 
the  very  individuals  concerned  no  sooner  saw  the 
mechanism  they  had  set  up  actually  begin  to  operate 
than  they  were  seized  with  terror,  and  devoted  their 
remaining  energies,  through  all  their  lives,  to  undoing 
or  checking  the  mischief  thus  brought  about.  Few 
states  whose  delegates  took  part  in  this  expensive 
game  but  would,  to-day,  be  glad  to  see  the  condition 
of  things  which  existed  in  1867  brought  back  at  almost 
any  sacrifice. 

Having  decided,  or,  if  that  expression  is  too  strong, 
having  allowed  themselves,  to  go  on  with  the  scheme 
of  international  coinage  upon  the  basis  of  a  single 
metal,  the  Conference,  naturally  enough,  fixed  upon 
gold  as  that  metal.  The  enormous  production  since 
1851  had  created  the  general  impression  that  gold 
was  to  become  highly  and  permanently  abundant ;  and 
the  members  of  the  Conference  seem  to  have  been  so 
thoroughly  imbued  with  this  idea  that  only  one,  Mr. 
Mees,  of  Holland,  thought  it  necessary  to  raise  the 
question  whether  there  was  a  sufficiency  of  that  metal 
to  justify  the  throwing  overboard  of  silver.  This  all- 
important  step  having  been  decided  upon,  with  an 
ease  and  lightness  which  are  to-day  matters  of  amaze- 


1 5  8  BIME  TA  LLISM. 

ment,  the  Conference  had  no  difficulty  in  proposing  a 
scheme  of  international  coinage  which  reads  very 
prettily  in  the  report,  and  would  be  very  nice  in 
Utopia.  A  unanimous  result  was  reached,  amid  gen- 
eral congratulation;  and  the  Conference  of  1867  passed 
into  history.  The  tone  in  which  the  subject  had  been 
dealt  with  may  be  judged  by  the  following  extract 
from  the  report  made  by  Mr.  Samuel  B.  Ruggles, 
who  represented  the  United  States  on  this  occasion, 
to  the  Department  of  State: 

"  The  establishment  of  a  single  standard  exclusively  of  gold 
is,  in  truth,  the  cardinal,  if  not  the  all-important,  feature  of  the 
plan  proposed  by  the  Conference,  relieving  the  whole  subject, 
by  a  single  stroke  of  the  pen,  from  the  perplexity,  and,  indeed, 
the  impossibility,  of  permanently  unifying  the  multiplicity  of 
silver  coins  scattered  through  the  various  nations  of  Europe. 
It  is  a  matter  of  world-wide  congratulation  that,  on  this  vital 
point,  the  delegates  from  the  nineteen  nations  represented  in 
the  Conference  were  unanimous." 

Does  it  seem  credible  that  any  body  of  intelligent 
men  could  have  approached  the  question  of  demonetiz- 
ing silver  in  such  a  light  and  airy  way?.  Looking  back 
upon  the  twenty-three  years  which  have  elapsed  since 
the  first  practical  step  was  taken  to  carry  out  the 
recommendations  of  the  Conference  of  1867,  years  full 
of  agitation  and  disturbance  in  industry  and  trade,  at 
the  end  of  which  the  world  is  less  reconciled  to  gold 
monometallism  than  at  the  beginning,  while  bimetal- 
lism stands  far  more  strongly  supported  by  economic 
opinion  than  ever  before,  it  is  pertinent  to  remark 
that,  if  the  Conference  had  given  itself  the  trouble  of 
making  a  second  stroke  of  the  pen,  and  had  even 
indulged  in  that  "sober  second-thought  "  which  is  to 


DEMONS  TIZA  TION.  1 59 

be  commended  to  all  who  deal  with  human  policies 
and  institutions,  the  result  might  have  been  happier. 
I  deem  it  not  unfair,  though  it  sounds  somewhat  harsh, 
to  say  that  the  character  and  purpose  of  the  Confer- 
ence of  1867  may  be  judged  by  the  single  fact  that 
Mr.  Ruggles  represented  the  United  States  on  this 
occasion.  Had  the  people  of  this  country  really  in- 
tended to  take  part  in  the  serious  discussion  of  a  ques- 
tion of  such  an  immense  and  far-reaching  consequence, 
not  one  man,  but  a  delegation  of  men,  and  men  of  a 
high  order  of  statesmanship  and  intellectual  power, 
would  have  gone  to  Paris.  Gone  to  Paris,  did  I  say  ? 
Mr.  Ruggles  did  not  even  go  to  Paris  for  that  purpose. 
He  was  already  there,  as  the  United  States  Commis- 
sioner to  the  Exposition;  and,  to  save  the  expense  of 
sending  a  delegate  to  the  Conference,  was  empowered 
to  act  in  that  capacity. 

One  of  the  most  common  charges  made  against  bi- 
metallists,  throughout  the  recent  controversy,  has  been 
that  they  are  theorists.  This  is  a  phrase  which  has 
done  much  service.  But  I  know  of  nothing  throughout 
the  whole  range  of  bimetallist  literature  which  is  so 
thoroughly  academic,  theoretical,  and  idealistic  as  the 
discussions  in  the  Conference  of  1867;  nothing  so  com- 
pletely devoid  of  practical  considerations  and  of  all 
reference  to  the  facts  of  life  and  industry.  The  action 
of  the  Conference  was  had  in  perfectly  cold  blood. 
No  necessity  for  doing  anything,  whatever,  pressed 
upon  its  members.  It  had  been  called  for  the  purpose 
of  dealing  with  the  problem  of  international  coinage ; 
and  it  was  only  when  it  found  progress  in  that  direction 
blocked  that  it  took  up  a  question  which  was  of  in- 


l6o  BIMETALLISM. 

finitely  greater  consequence,  and  declared  in  favor  of 
uprooting  silver  in  countries  embracing  a  thousand 
million  of  human  beings  where  it  had  immemorially 
been  used.  Mr.  Ruggles's  "single  stroke  of  the  pen" 
is  likely  to  occupy  the  same  place  in  monetary  history 
which  M.  Ollivier's  equally  felicitous  and  appropriate 
phrase  about  going  into  the  German  war  "with  a  light 
heart  "  occupies  in  political  history.  In  each  instance, 
measures  the  most  momentous,  fraught  with  the  direst 
disaster,  were  undertaken  in  the  most  trifling  spirit 
and  with  an  entire  absence  of  consideration  for  the 
practical  difficulties  of  the  situation.  People  who  go 
into  war  "with  a  light  heart  "  are  likely  to  come  out 
with  a  heavy  one:  financiers  and  currency-tinkerers 
who,  "with  a  single  stroke  of  the  pen,"  undertake  to 
order  up  a  new  monetary  system  for  the  universe  are 
likely  to  find  that  human  nature  is  a  very  real  and 
tough  thing;  and  that  the  habits,  instincts,  traditions, 
and  prejudices  of  a  thousand  millions  of  men  are  facts 
it  is  well  enough  to  take  account  of  at  the  outset. 

The  charge  brought  against  bimetallists  of  being 
unpractical  and  idealistic  may  be  retorted  to  its  entire 
extent  and  with  tremendous  force,  upon  those  who 
bring  it.  The  bimetallists  of  to-day  stand  upon  the 
ancient  order.  Universal  monometallism  is  the  new 
and  untried  thing.  Bimetallism  is  the  old  and  well- 
approved  monetary  system  of  mankind.  We  know 
what  bimetallism  is  and  what  it  will  do.  The  method 
of  its  operation,  the  nature  of  its  effects,  are  well 
known,  and  can  be  studied  historically  and  statis- 
tically, upon  a  wide  scale.  No  one  knows  what 
universal  monometallism  would  be,  or  what  it  would 


DEMONS  TIZA  TION.  1 6 1 

do.  Such  a  thing  never  existed.  During  the  past 
twenty  years  the  world  has  made  rapid  progress  in 
that  direction ;  but  the  end  is  still  far  distant,  and  no 
one  can  say  what  that  system  would  be,  and  what 
effects  it  would  produce.  Monometallism  is  only 
half  born.  The  twenty-three  years  during  which  it 
has  been  trying  to  make  its  way  into  the  light  have 
been  years  of  unparalleled  commercial  disaster  and 
disturbance;  and  at  the  end  of  that  painful  period, 
leading  gold  monometallists,  like  Sir  Robert  Giffen, 
declare  that  the  system  cannot  possibly  be  extended 
to  India  and  the  further  East  * ;  or,  like  Soetbeer  and 
Lexis,  of  Germany,  declare  that  it  has  already  gone 
too  far  in  Europe  and  that  a  portion  of  the  ground 
must  be  retraced.  On  the  other  hand,  bimetallism 
has  a  long  record  of  beneficent  activity  in  promoting 
the  stability  and  regularity  of  trade  and  production. 
'Therefore  it  is  not  true  that  the  presumption  is  in 
favor  of  our  opponents,  and  that  the  burden  of  proof 
rests  on  us.  Exactly  the  opposite  of  this  is  the  case. 
Monometallism  is  fairly  subject  to  all  the  incredulity 
and  doubt  which  attach  to  new  schemes  of  far-reach- 
ing extent,  proposed  by  theorists  and  idealists  for 
popular  acceptance. 

*Sir  R.  Giffen,  before  the  Royal  Commission  on  Depression  in 
Agriculture,  refused  to  discuss  the  question  of  India  having  gold 
money,  declaring  that  it  was  simply  impossible. 

Ans.  No.  18,348.  "  I  do  not  think  it  is  possible  for  India  to 
have  a  gold  standard." 

Ans.  No.  18,349.  "  I  am  quite  unable  to  do  so,  because  I  do 
not  think  the  thing  could  be  done  at  all." 

Ans.  No.  18,350.  "  My  own  opinion  is  that  you  could  not  do  it 
at  all." 


1 62  BIMETALLISM. 

Again,  bimetallists  have  been  popularly  charged 
with  desiring  to  "tinker  the  currency."  What  was 
it  the  monometallists  did  at  Paris,  in  1867,  when  they 
decreed,  so  far  as  in  them  lay,  that  silver  should,  by 
act  of  government,  by  force  of  law,  be  thrust  out  of 
the  place  it  had  immemorially  occupied  in  the  cur- 
rencies of  the  world,  and  gold  be  foisted,  by  act  of 
government,  by  force  of  law,  upon  countries  where  it 
had  never  been  known  as  money  ?  Absolutely  no 
necessity  existed  for  the  change  at  the  time.  The 
single  professed  object  of  the  Conference,  in  thus  pro- 
posing to  "tinker  the  currency,"  was  to  secure  a 
metrical  and  mathematical  unity  of  coinage  through- 
out the  world,  a  result  which  is  further  off  now  than 
it  was  then.  For  the  sake  of  a  purely  ideal  object, 
the  Conference  of  1867  proposed  to  revolutionize  the 
monetary  system  of  the  world. 

It  has  been  said,  in  defence  of  the  Conference  of 
1867,  that  that  body  only  "registered  the  decree  of 
nature."  The  facts  strongly  contradict  such  an  asser- 
tion. For  fifteen  years,  the  average  annual  value  of 
gold  had  been  below  that  of  silver,  according  to  the 
French  ratio ;  and  it  was  only  in  the  very  year  of  the 
Conference,  1867,  that  gold  rose  above  that  ratio,  and 
that  by  only  seven  points,  namely,  to  15.57,  or  less 
than  one  in  two  hundred.  In  1868  it  rose  only  to 
15.59;  in  J869,  only  to  15.60;  while  in  1870  and  1871 
it  fell  back  to  15.57.*  Even  had  the  commissioners 
known  what  was  to  be  the  ratio  of  the  year  in  which 
they  met,  even  could  they  have  foreseen  the  ratios  of 

*  See  page  176. 


DEMONETIZATION.  163 

the  four  years  following,  what  inference  could  they 
have  drawn  against  the  continued  use  of  silver,  in  the 
face  of  the  fact  that,  for  a  longer  period,  the  ratio  had 
been,  in  a  larger  degree,  upon  the  other  side  of  the 
line  of  15.50  ?  How  could  the  commissioners  know, 
how  could  the  wisest  man  know,  that  a  turn  of  the 
tide,  such  as  had  more  than  once  taken  place,  might 
not,  in  any  year,  bring  gold  again  below  the  line  of 
15.50  ?  And  why,  meanwhile,  might  not  the  French 
system,  reinforced,  or  not,  by  other  States  of  great 
commercial  and  financial  power,  have  continued  to  do 
its  beneficent  work,  and  even  more  abundantly  ?  I 
repeat,  there  never  was  anything  more  academic,  more 
purely  theoretical,  more  intensely  idealistic,  more 
against  the  laws  of  nature  and  the  constitution  of 
human  society,  more  in  the  nature  of  "tinkering  the 
currency  "  and  imposing  arbitrary  conceptions  upon 
the  races  of  men,  than  the  proceedings  and  the  pro- 
posals of  the  Conference  of  1867.  That  body  com- 
pletely disregarded  the  facts  of  history  and  the 
structure  of  trade  and  industry.  It  took  no  account  of 
the  division  of  the  world  into  two  great  groups  of 
nations,  one  using  gold  and  one  using  silver.  It 
treated  with  contempt  the  instincts,  the  habits,  the 
traditions  of  nations  comprising  a  thousand  million 
people,  the  rate  of  their  wages,  their  ruling  prices, 
the  scale  of  their  exchange  transactions.  It  proposed 
to  rewrite  history  and  reconstitute  society  in  its  in- 
dustrial and  financial  characters. 

Weak  as  we  now  see  the  whole  work  of  the  Confer- 
ence of  1867  to  have  been,  its  recommendation  of  gold 
monometallism  could,  nevertheless,  not  fail  to  exercise 


164  BIMETALLISM. 

great  influence  upon  public  sentiment.  That  is  the 
price  at  which  men  who  ought  to  know  better  meddle 
in  matters  of  infinite  consequence  ' '  with  a  light  heart, 
and  attempt  to  settle  them  "by  a  single  stroke  of  the 
pen."  The  unanimous  adoption  of  such  a  recommen- 
dation by  a  Conference  in  which  twenty  nations  were 
represented  from  that  time  onward  constituted  a 
powerful  argument  in  the  hands  of  those  who,  in 
France,  Germany,  and  Belgium,  had  long  been  writing 
and  speaking  in  favor  of  the  single  standard  of  gold. 
And  yet  the  battle  was  far  from  won.  Although  the 
discussions  in  the  Conference  had  gone  on  swimmingly, 
and  the  report  had  been  adopted  amid  a  buzz  of  mutual 
congratulations,  this  had  only  been  bec'ause  the  diffi- 
culties of  the  subject  were  not  allowed  to  come  at  all 
into  view,  possibly  because  the  Conference  did  not 
take  itself  seriously.  But  such  a  suppression  of  the 
real  problems  of  the  situation  within  the  Conference 
could  not  keep  them  down  in  the  public  mind.  No 
sooner  were  the  recommendations  submitted  to  the 
people  than  the  genuine  discussion  of  the  subject  com- 
menced. A  local  French  Commission  had,  earlier  in 
1867,  decided  in  favor  of  the  retention  of  the  bimetallic 
system.  But,  just  as  the  calling  of  the  Conference 
had  been  for  the  glorification  of  the  Empire,  so,  now, 
the  work  of  the  Conference  was  deemed  by  many  to 
be  in  a  measure  connected  with  its  prestige.  A  new 
Commission  was  summoned ;  and,  by  a  majority  vote, 
recommended  the  adoption  of  the  single  gold  standard. 
Still  the  practical  sense  and  the  solid  experience  of  the 
French  people  asserted  themselves.  The  men  who 
controlled  the  Bank  of  France  were  not  to  be  dazzled 


DEMONETIZATION.  1 65 

by  the  imperial  dream  of  a  monetary  millennium  in 
which  France  should  'give  a  currency  to  the  whole 
world.  Those  masterly  financiers  too  well  apprehended 
the  consequences  of  a  demonetization  of  silver,  to 
allow  themselves  to  be  influenced  by  any  glow  of 
partiotic  feeling  or  by  the  illusions  of  an  impracticable 
monometallism.  The  whole  course  of  public  discus- 
sion had  strengthened  the  bimetallic  system.  Not 
an  argument  in  favor  of  the  single  gold  standard 
had  been  brought  forward  which  had  not  been  pre- 
sented in  the  Conference  of  1867;  but  the  objections 
which  had  then  been  glided  over  so  smoothly  came 
more  and  more  strongly  and  abruptly  into  view. 
Towards  the  close  of  1 869,  the  Conseil  Supdrieur  de 
r  Etat  was  summoned  to  take  into  consideration  the 
question  of  the  so-called  double  standard,*  as  against 
the  single  standard  of  gold.  The  members  of  that 
body,  which  was  re-enforced  for  this  occasion  by  several 
persons,  publicists  and  officials,  from  the  outside,  were 
known  to  be  predominantly  in  favor  of  the  single 
standard  of  gold.  But  the  financiers  of  the  Bank  of 
France  would  not  allow  themselves  to  be  overborne 
without  a  protest;  and  M.  Rouland,  the  Governor, 
and  Baron  Alphonse  de  Rothschild  and  others  of  the 

*  It  should  be  said  that  the  most  authoritative  bimetallist 
writers,  while  perhaps  sometimes  using  the  term  from  the  force 
of  habit,  do  not  admit  that  the  words  "  double  standard  "  properly 
express  the  purpose  and  effect  of  bimetallism.  That  term  is  ad- 
missible only  as  contrasted  with  the  single  standard  of  gold  or  of 
silver.  International  bimetallism  would  establish  a  standard — 
one  standard — the  bimetallic  standard — which  would  confessedly 
be  more  uniform,  stable,  and  reliable  than  a  standard  of  either 
metal  alone. 


1 66  '  BIMETALLISM. 

Regents,  offered  a  strenuous  opposition,  defending 
the  law  of  the  year  XI  against  the  aspersions  that 
had  been  brought  against  it;  maintaining  that  it  had 
safely  carried  France  through  a  great  crisis  and  saved 
the  world  from  a  veritable  monetary  revolution ;  and 
asserting  its  superiority  to  the  system  of  the  single 
gold  standard.*  Baron  de  Rothschild  declared  that 
for  the  sake  of  avoiding  obvious  inconveniences,  which 
he  described  as  very  trifling,  it  was  proposed  to  destroy 
the  link  between  the  world's  two  moneys,  and  to  make 
a  revolutionary  change  in  the  money  of  the  West; 
that  the  demonetization  of  silver  would  be  the  actual 
destruction  of  a  portion  of  the  world's  capital;  it 
would  be  ruin,  involving  not  only  French,  but  inter- 
national, commerce  in  the  most  serious  embarrass- 
ments, f  "Had  I,"  he  exclaimed,  "to  choose  a 
system,  with  the  experience  we  have,  I  should  not 
hesitate  to  accept  that  of  the  double  standard."  The 
monometallists,  however,  who  were  in  a  majority, 
would  not  be  denied ;  and,  in  the  result,  by  seventeen 
to  six,  a  declaration  in  favor  of  a  single  gold  standard 
was  obtained.  Yet  the  monometallists  were  seemingly 
as  far  as  ever  from  attaining  the  practical  accomplish- 
ment of  their  object.  Discussion  had  only  brought 
more  strongly  into  view  the  real  and  serious  objec- 
tions which  withstood  such  a  revolutionary  change  of 
the  monetary  system  approved  by  two  generations  of 
practical  experience. 

"  Dans  ces  dix  dernieres  annees,  1'Angleterre  a  subi  des  crises 
bien  autrement  dfesastreuses  que  les  notres." 

f  "  Ce   serait  detruire  une  portion  du  capital  du  monde  :  ce  se- 
rait  une  mine," 


DEMONE  TIZA  TION.  1 67 


THE   ACTION    OF   GERMANY. 

In  1870  hostilities  with  Germany  began.  For 
eighteen  months  France  was  trampled  under  the  iron 
hoof  of  war.  On  the  i8th  of  January,  1871,  at 
Versailles,  William  was  crowned  Emperor  of  Germany ; 
and  before  the  close  of  the  year,  the  Reichstag  passed 
a  law  under  which  Germany  was  to  pass  over,  from 
the  single  standard  of  silver  to  the  single  standard  of 
gold.  If  there  is  one  thing  which  more  than  all  others 
arouses  the  ire  of  the  monometallist,  it  is  the  intima- 
tion that  war  with  France  had  anything  to  do  with  the 
demonetization  of  silver  by  Germany.  Yet,  after  all, 
it  hardly  seems  rational  to  deny  that  the  connection 
existed.  Aside  from  the  remarkable  coincidence  of 
dates  there  is  a  little  something,  familiarly  called 
human  nature,  which  requires  to  be  mentioned,  though 
the  subject  is  always  an  unwelcome  one  to  the  mono- 
metallist. Germany  had,  it  is  known,  long  been 
hesitating  over  the  subject  of  its  currency.  So  late 
as  1869,  Mr.  Bagehot  had  written:  "Germany  has  a 
currency  to  choose;  none  of  her  many  currencies, 
which  have  descended  from  her  divided  states,  are  fit 
to  be  her  exclusive  currency,  now  that  she  is  one.  If 
things  remain  as  now,  she  is  sure  to  adopt  the  French 
currency :  already  there  is  a  proposal  in  the  Federal 
Parliament  that  she  should  take  it."  (A  Universal 
Money,  p.  13.)  Was  or  was  there  not  something,  or 
many  things,  in  or  arising  out  of  the  war  of  1870-71 
which  would  have  a  tendency  to  cause  Germany  to  take 
action  where  she  might  otherwise  have  maintained 
her  attitude  of  expectancy;  and  to  take  that  action 


1 68  BIME  TALLISM, 

in  a  direction  different  from  that  which  she  might 
otherwise  have  chosen?  Let  us  see.  In  the  first  place, 
Germany  was  to  receive  from  France,  as  a  war  in- 
demnity, five  milliards  of  francs,  a  billion  of  dollars 
in  our  money.  This  enormous  prize  of  war  furnished 
the  means  for  a  complete  change  of  her  currency  sys- 
tem, the  cost  of  which  might  otherwise  have  long 
deterred  her  from  such  a  course,  even  if  the  sentiment 
of  her  statesmen  and  financiers  had  been  unanimous  in 
its  favor,  as  was  not  the  case.  Secondly,  the  war  had 
brought  about  the  formal  unification  of  Germany,  by 
the  accession  of  the  Southern  nations;  while  every 
German  statesman,  from  the  Emperor  down,  well  knew 
that  Particularism  was  still  strong,  and  that  the 
antagonisms,  rivalries,  jealousies,  and  animosities  of 
generations  could  not  fail  to  embarrass  the  movement 
to  a  true  imperialism.  The  opportunity  of  securing 
a  new  coinage,  opened  up  by  the  demonetization  of 
silver  and  the  adoption  of  the  gold  standard,  must 
have  commended  itself  strongly,  from  a  purely  politi- 
cal point  of  view,  to  every  champion  of  imperial 
authority.  Thirdly,  the  war  had  heightened  the  self- 
esteem  and  quickened  the  self-assertion  of  the  German 
people.  Such  a  marvelous  triumph  had  naturally 
created  lofty  ideas  of  the  resources  and  the  destiny  of 
Germany.  That  people  would  have  been  less  than 
human,  or  more  than  human,  if  they  had  not  suffered 
a  great  illusion  in  these  respects.  To  a  nation  in  such 
a  mood,  the  suggestion  of  shaking  off  its  association 
with  countries  using  silver  as  their  principal  money, 
and  passing  over  to  those  whose  use  of  money  of  gold 
was  popularly  imagined  to  be  a  proof  and  evidence  of 


DEMONE  TIZA  TION.  1 69 

their  greatness  and  wealth,  could  hardly  fail  to  be 
very  captivating.  Finally,  it  is  rather  too  much 
to  ask  us  to  believe  that  the  sentiments  of  intense 
hatred  and  aversion,  which  war  always  enkindles 
among  combatants,  found  no  shade  of  gratification 
in  the  proposal  to  strike  what,  at  the  time,  seemed 
a  fatal  blow  at  the  financial  prestige  and  influence 
of  France  by  destroying  the  system  which  had  been 
set  up  by  the  great  Napoleon  himself,  only  three 
years  before  Jena.  Few  of  us  claim  to  be  so  good  as 
to  be  wholly  unsusceptible  to  international  prejudices 
and  animosities.  It  was  the  French  system,  the  Latin 
system,  which  was  thus  to  be  broken  down  by  the 
champion  of  Pan-Teutonism. 

For  the  foregoing  reasons,  I  must  regard  the  Franco- 
German  war  as  having  had  a  great  deal  to  do  with  the 
demonetization  of  silver.  I  am  aware  that  in  Germany, 
as  in  France,  there  had  long  been  a  party,  having  for 
its  leaders  Herr  Delbruck,  Herr  Bamberger,  and  Dr. 
Soetbeer,  which  urged  the  policy  of  gold  monometal- 
lism; yet  I  believe  it  to  be  a  reasonable  statement 
that,  but  for  the  breaking  out  of  hostilities,  Germany 
would  for  years  have  delayed  any  action  to  that  end, 
perhaps  to  the  time  when  some  less  selfish  and  indi- 
vidualistic treatment  of  the  subject  would  have  become 
possible.  Even  that  ferocious  monometallist,  Mr. 
W.  A.  Shaw,  who  deems  bimetallism  a  "malignant  " 
and  a  "pernicious"  thing,  admits  that  the  war  and 
the  consequent  erection  of  the  Empire,  "enormously 
facilitated  the  process."  He  says  this  "cannot  for 
a  moment  be  questioned." 

The  monometallists,   disclaiming,   as  I   have  said, 


1 70  BIME  TA  LLISM. 

the  influences  arising  from  the  war  and  from  the  results 
of  the  war,  as  having  had  anything  to  do  with  the 
action  of  Germany,  have  been  wont  to  speak  of  that 
action  as  taken  "in  obedience  to  the  laws  of  trade." 
Here,  as  in  respect  to  England  in  1816,  they  are  fond 
of  declaring  that  legislation  but  registered  the  decrees 
of  commerce,  or  responded  to  a  popular  demand. 
They  point  to  the  change  in  the  ratio  between  gold 
and  silver,  which,  as  already  stated,  began  in  1867,  as 
conclusive  on  this  subject.  Yet,  as  has  been  shown, 
while  gold  did,  indeed,  after  ruling  for  fifteen  years 
below  the  French  standard,  then  pass  above  it,  the 
difference  in  its  favor  was  still  very  slight,  far  slighter 
than  had  been  the  differences  in  favor  of  silver  for  so 
long  a  term.  That  difference  might,  at  any  moment, 
be  neutralized  by  a  change  in  the  conditions  of  pro- 
duction, such  as  more  than  once  occurred  during  the 
century.  But  even  supposing  these  differences  to 
persist,  or  to  increase,  there  was  nothing  in  them 
which  was  incompatible  with  Germany  retaining  her 
silver  money,  or  with  France  continuing  to  perform 
that  beneficent  function  for  the  trade  and  industry  of 
the  world  which  she  had  carried  on  for  seventy  years. 
The  demonetization  of  silver  by  Germany,  which 
was  first  decreed  by  the  law  of  December  4,  1871,  and 
was  finally  carried  out  under  the  Act  of  July  9,  1873,* 

*  Meanwhile,  Norway,  Sweden,  and  Denmark  had  concluded  a 
monetary  treaty  in  1872,  which  was  ratified  by  Sweden  and  Den- 
mark in  1873.  and  by  Norway  in  1875,  for  the  adoption  of  the 
single  gold  standard.  Holland  in  1875  adopted  a  nominal  "double 
standard  "  of  gold  and  silver  ;  but  the  actual  coinage  of  the  latter 
metal  was  prohibited.  In  1876  Russia  suspended  the  coinage  of 


D  EM  ONE  TIZA  7  'ION.  1 7 1 

brought  about  a  situation  of  the  most  momentous 
consequence  to  France.  By  this  measure  Germany 
passed  definitively  over,  from  the  States  which  had  the 
single  standard  of  silver,  to  the  ranks  of  those  which 
had  the  single  standard  of  gold.  Up  to  this  time 
Germany  had  been  one  of  the  largest  consumers  of 
silver.  Not  only  was  she  to  cease  for  the  future  to 
create  a  demand  for  that  metal,  now  tending  to 
become  cheaper  than  by  the  French  ratio,  under  the 
yield  of  the  Nevada  mines;  but  she  threatened,  in  this 
very  act,  to  become  a  seller  of  silver.  The  latter 
metal  was,  indeed,  still  to  be  used  in  fractional  money; 
but  it  was  provided  that  the  amount  of  silver  coined 
should  not  exceed  10  marks  per  head  of  the  popula- 
tion, and  that  no  individual  need  accept  more  than  20 
marks  of  imperial  silver  coin  in  any  one  payment.  It 
was  estimated  that  the  provisions  for  carrying  out 
this  measure  would  throw  upon  the  market  a  vast 
amount  of  the  discarded  metal.*  Not  only  so:  Ger- 
many was  to  enter  the  market  for  gold  as  a  large  pur- 
chaser, to  obtain  the  material  for  the  new  imperial 
coinage. f  France  had,  as  we  have  seen,  long  kept  the 


silver  except  of  "  trade  "  coins  for  use  in  China.  Austria  sus- 
pended silver  coinage  in  1879. 

*  "  In  carrying  out  the  monetary  reform  there  was  sold,  up  to 
the  end  of  March  1893,  7,205,151  pounds  fine,  the  product  of  the 
melting  of  silver  coins  of  a  nominal  value  of  672,862,729  marks." 
(Silber  Kom.  1894.  Drucksache,  vi.  p.  7.) 

f  To  the  end  of  1893,  Germany  had  coined,  net,  of  gold,  since  the 
establishment  of  the  Imperial  system,  2,734,462,700  m. ;  of  this  no 
less  than  1,015,837,020  in  the  two  years  1872  and  1873.  (Silber- 
Kom.,  1894.  Drucksache,  vi.  p.  3.) 


1/2  BIMETALLISM. 

monetary  peace  of  the  world  by  buying  the  metal 
which  fell,  and  selling  the  metal  which  rose.  Germany 
was  now  to  enter,  to  make  the  task  of  France  more 
difficult  by  selling  the  metal  which  was  falling,  and 
buying  the  metal  which  was  rising.  Standing  mid- 
way, both  financially  and  geographically,  between  the 
great  gold-standard  State  of  England  and  the  great 
silver-standard  State  of  Germany,  France  had  been 
able  to  perform  her  function  of  the  exchange  of  the 
metals,  in  a  way  to  preserve  substantial  equilibrium 
throughout  seventy  years.  The  abrupt  passage  of 
Germany  from  the  ranks  of  silver-using  countries  to 
those  of  the  gold-using  countries  appeared,  even  to 
those  who  had  kept  their  faith  and  courage  through 
the  great  Californian  and  Australian  panic,  to  threaten 
the  downfall  of  the  French  system.  It  was  under 
these  circumstances  that  France  took  the  first  fatal 
step  towards  checking  the  coinage  of  silver.  This  was 
done  by  extending  the  period  of  the  receipts — bans  de 
monnaie — which  were  given  at  the  mint  for  bullion 
delivered.  The  usual  term  of  these  receipts,  which 
were  transferable  and  discountable,  had  been  ten  days. 
To  meet  the  apprehended  danger  from  the  arrival  of 
discarded  German  silver,  the  "due-dates"  of  these 
receipts  were  postponed,  while  the  amount  which  could 
be  issued  daily  was  restricted.  These  measures  be- 
came, of  themselves,  a  sufficient  cause  for  a  further  fall 
in  the  price  of  silver;  and  the  mint  was  obliged  to 
protect  itself  by  successive  extensions  of  the  term  of 
the  receipts,  that  is,  by  postponing  the  "due-dates," 
more  and  more,  till,  by  the  middle  of  1874,  that  term 
had  reached  nine  months,  that  is,  the  government 


DEMONE  TIZA  TION.  1 73 

would  only  undertake  to  return  five-franc  pieces  in 
April  of  1875,  on  account  of  bullion  deposited  in 
July  of  1874. 

If  it  be  asked  why,  if  the  statesmen  and  financ- 
iers of  France  really  believed  in  the  bimetallic  sys- 
tem, they  did  not,  in  this  new  crisis,  thus  suddenly 
developed,  stand  by  their  guns  and  maintain  their 
monetary  system,  it  is  to  be  answered,  first,  that 
the  efficiency  of  that  system  has  always  been  admitted 
to  be  wholly  a  question  of  proportion,  a  matter  of  de- 
gree; and  the  action  of  Germany,  above  recited,  turned 
the  scale  against  the  bimetallic  system  with  a  force 
which,  it  was  then  not  unreasonable  to  believe,  could 
not  be  resisted.  Secondly,  France  was  in  a  most 
pitiable  case,  as  the  result  of  the  war  she  had  so  sense- 
lessly provoked.  The  waste  of  her  accumulated 
resources  had  been  enormous;  her  productive  ener- 
gies had  been  crippled ;  two  of  her  fairest  provinces 
had  been  lost  to  her;  and  she  was  compelled  to  pay 
the  monstrous  sum  of  five  milliards  of  francs,  as  an 
indemnity  to  Germany.  Thirdly,  France  had  no 
greater  interest  in  the  bimetallic  system  than  any  other 
nation  of  Europe,  except  as  a  holder  of  coined  silver; 
and,  indeed,  her  interest  was  smaller  than  that  of 
some,  by  reason  of  the  slight  commercial  importance 
of  her  colonial  possessions. 

It  has  been  asserted  by  many  monometallist  writers 
that  a  distinct  fall  of  silver  preceded  the  closing  of  the 
French  mints.  It  appears  to  me  that  Mr.  Hucks  Gibbs, 
in  his  article  in  the  British  Economic  Journal  of  March, 
1891,  has  shown  this  statement  to  be  unfounded,  at 
least  so  far  as  any  appreciable  decline  in  the  price  is 


1 74  BlME  TA  LLISM. 

concerned.*  But,  even  if  it  were  so,  the  threat  of 
German  demonetization  would  sufficiently  explain 
the  effect,  f  It  is,  moreover,  to  be  said  that  France, 
by  entering  the  Latin  Union,  had  in  some  degree 
compromised  her  independence  and  freedom  of  ac- 
tion. Two  of  the  States  of  the  Latin  Union,  Bel- 
gium and  Switzerland,  had  long  been,  in  a  consid- 
erable degree,  well  affected  toward  gold  monometal- 
lism; and  the  natural  desire  of  France  to  maintain  her 
political  and  financial  prestige  among  the  Latin  coun- 
tries made  it  impossible  for  her  to  deal  as  peremptorily 
with  the  subject  as  if  she  had  been  obliged  to  consider 
only  the  views  and  wishes  of  her  own  people. 

The  first  fatal  step  having  been  taken  in  the  restric- 
tion of  silver  coinage,  others  followed  by  an  almost 
irresistible  necessity,  until  the  result  was  reached  of 
an  absolute  cessation  of  such  coinage  upon  individual 
account,  the  several  governments  of  the  Latin  Union 
binding  themselves  to  coin  silver  only  in  definite  pro- 
portions. That  state  of  things  has  continued  practi- 
cally until  the  present  time.  The  bimetallic  law  has 

*  "  There  was,  indeed,  a  fall  ofprice  before  the  suspension  of  the 
law,  viz.,  from  60. 25d.  in  April  1872  to  59-75d.  in  May  1873 — 
that  is  to  say,  a  gradual  decline  over  a  period  of  thirteen  months, 
to  the  extent  of  ^d.  per  ounce.  It  is  true,  also,  that  apprehension 
of  what  would  follow,  if  the  Mint  were  to  be  closed,  caused  the 
price  to  fall  nearly  another  |d.  in  the  ensuing  three  months  ;  but 
when  the  suspension  of  the  Mint  law  really  began,  the  price  fell 
another  id.  by  December  3Oth,  and  declined  pari  passu  with  the 
further  suspension;  and  it  both  fluctuated  violently  and  fell 
rapidly  when  the  Mint  was  finally  closed  and  the  barrier  which 
prevented  a  further  fall  was  broken  down." 

f  "The  actual  efflux  of  gold  to  Germany  commenced  in  the 
year  1871."  (Giffen,  Herschell  Commission,  1887,  No.  489.) 


DEMONS  T1ZA  TION.  1 7 $ 

not  been  repealed;  but  the  suspension  of  silver 
coinage  has  substituted  for  the  so-called  double  stand- 
ard what  it  has  pleased  writers  on  the  subject  to  call 
the  "limping  standard."  The  five-franc  pieces  of 
silver  are  still  legal  tender  in  unlimited  amount;  but 
the  number  of  these  pieces  cannot  be  increased  by 
new  coinage;  and,  consequently,  through  the  steady 
operation  of  wear  and  tear  and  accidental  loss,  the 
proportion  of  gold  in  the  monetary  circulation  has 
continually  increased.  Even  in  the  Bank  of  France 
the  reserve  has  greatly  changed.  In  1881  the  Bank 
held  gold  to  the  amount  of  22  per  cent  of  its  note 
circulation,  and  silver  to  the  amount  of  48  percent  of 
the  same.  In  January  of  1896  the  corresponding 
figures  were,  respectively,  58  and  34. 

The  causes  that  have  been  recited  led  to  immediate 
changes  in  the  relative  values  of  the  two  metals,  which, 
though  they  have  been  frequently  cited  as  showing  the 
impossibility  of  bimetallism,  are  really,  to  any  candid 
and  intelligent  mind,  the  strongest  proof  that  could 
possibly  be  afforded  of  the  power  which  that  system 
is  capable  of  exerting.  We  have  seen  how  small  and 
narrow  was  the  range  of  the  effects  in  this  direction 
resulting  from  the  overwhelming  change  in  the  condi- 
tions of  production  through  which  the  proportion  of 
gold  to  silver  in  the  annual  output  increased  fifteenfold 
in  forty  years,  and  fivefold  in  four  years.  We  have 
seen  how  closely,  even  after  gold  rose  above  the  line  of 
15.50,  it  still  held  to  that  line.  In  1867,  the  year  in 
which  the  International  Monetary  Conference  of  Paris 
recommended  the  universal  demonetization  of  silver, 
the  annual  average  ratio  was  15.57;  m  1868  it  was 


1 76  BIME  TA  LLISM. 

15.59;  in  1869,  15.60;  in  1870,  15.57;  *n  l87r»  sti11 
again  15.57;  *n  l%72i  even  after  the  adoption  of  the 
provisional  act  of  demonetization  by  Germany,  the 
average  annual  ratio  was  15.63.  If  Mr.  Horton  was 
right  in  holding  that,  when  the  charge  for  mintage 
under  the  Act  of  1854  was  taken  into  account,  the 
price  of  silver  which  the  bimetallic  law  was  calculated 
to  maintain  was,  not  15.50,  but  15.58,  these  figures 
of  the  average  annual  value  of  gold,  in  terms  of  silver, 
become  even  more  remarkable.  But,  as  soon  as  the 
action  of  Germany  had  become  definitive,  rapid  and 
overwhelming  changes  took  place.  Although  the  law 
of  1873  was  passed  only  in  July,  the  average  annual 
ratio  of  that  year  was  15.92.  In  1874  it  became 
16.17;  in  ^75,  16.59;  in  1876,  17.88.  Injulyofthe 
latter  year  it  was  19.59.  The  effects  of  such  a  fall  in 
silver  were  immediately  felt  the  world  over.  The  bi- 
metallists,  of  course,  attributed  that  fall  to  the  political 
acts  of  Germany  and  the  Latin  Union,  which  have 
been  recited,  and  attached  little  importance  to  the  in- 
crease in  the  yield  of  silver,  which  had,  according  to  the 
Journal  des  feconomistes  tables,  risen,  from  an  average 
of  about  50  millions  of  dollars,  during  the  period  1863 
to  1870,  to  an  average  of  about  66  millions,  for  the 
five  years  following.  The  gold  monometallists,  on  the 
other  hand,  either  denied  or  disparaged  the  influence 
of  law  in  this  matter,  attributing  the  result  almost 
wholly  to  natural  causes,  such  as  the  lower  cost  of 
producing  silver,  or  to  commercial  causes,  such  as  the 
increasing  use  of  gold  in  the  arts,  and  the  reduction 
of  silver  exports  to  India,  which  at  this  time  had 
become  very  noticeable,  mainly  in  consequence  of  the 


DEMONE TIZA  TION.  I /7 

general  famine  in  that  country.  The  panic  of  1873 
and  the  long  and  critical  period  of  hard  times  which 
followed,  were,  by  the  bimetallists,  attributed  to  the 
demonetization  of  silver;  the  monometallists  declared 
these  to  be  the  natural  result  of  the  preceding  period 
of  speculation  and  inflated  prices. 

Under  commercial  and  financial  stresses  and  strains, 
such  as  those  of  1873  to  1876,  the  light  and  easy 
treatment  of  the  question  of  the  use  of  gold  and  silver 
as  money  became  impossible.  The  policy  of  effect- 
ing monetary  reforms  "with  a  single  stroke  of  the 
pen"  became  suspected.  The  most  stormy  con- 
troversy of  monetary  history  broke  out  about  1875, 
and  has  continued  to  rage  ever  since.  In  1876  the 
House  of  Commons  appointed  a  Select  Committee  on 
the  Depreciation  of  Silver;  and  in  the  same  year  a 
United  States  Commission  took  testimony  and  pub- 
lished a  report  on  the  whole  subject  of  Bimetallism. 
These  were  the  first  of  a  long  series  of  monetary  in- 
vestigations and  conferences  which  we  shall  have 
occasion  to  consider  in  the  two  following  chapters.  It 
is  safe  to  say  that,  in  spite  of  the  partisanship,  extrava- 
gance, and  exaggeration  which  have  characterized  the 
discussion,  on  both  sides  of  the  question,  monetary 
science  owes  more  to  this  period  than  to  all  which 
preceded  it.  One  has  only  to  compare,  book  in 
hand,  the  earlier  inquiries  with  the  reports  of  the 
Herschell  Commission,  for  example,  to  see  how  great 
has  been  the  advance  in  the  comprehension  of  the 
principles  of  trade  and  finance,  in  the  criticism  of 
monetary  statistics,  and  in  the  application  of  the  best 
results  of  advanced  economic  thinking  to  the  problems 


i;8  BIMETALLISM. 

of  money.  It  never  can  cease  to  be  a  subject  of  regret 
that  three  of  the  wisest  and  soundest  of  English 
economists  should  have  been  prematurely  cut  off  so 
early  in  its  course.  What  would  we  not  give,  whether 
monometallists  or  bimetallists,  to  have  had  Cairnes, 
Bagehot,  and  Jevons  participate  in  the  later  phases 
of  this  great  debate!  Of  the  Inquiries  of  1876  we 
may  speak  at  this  time,  for  they  are  to  be  regarded 
rather  as  pertaining  to  the  period  of  demonetization 
than  to  the  period  of  discussion  which  ensued.  While 
the  reports  contain  some  expert  testimony  of  high 
value,  on  matters  which  have  been  more  thoroughly 
and  carefully  gone  over  in  subsequent  investigations, 
they  are  chiefly  interesting  to  us,  to-day,  as  exhibiting 
the  surprise,  the  pain,  the  alarm,  and  the  indignation 
which  were  occasioned,  in  the  public  mind  of  both 
continents,  by  the  first  effects  of  demonetization. 

In  March,  1876,^  the  British  House  of  Commons 
appointed  a  Select  Committee  to  report  upon  the 
Causes  of  the  Depreciation  of  the  Price  of  Silver  and 
the  Effects  of  such  Depreciation  upon  the  Exchange 
between  India  and  England.  It  will  be  seen  that  the 
scope  of  the  Committee's  authority  was  narrow.  They 
were  neither  directed  to  report  as  to  measures  to  be 
adopted,  in  remedy  or  redress  for  any  grievance  which 
might  be  found  to  exist;  nor  to  investigate  the 
general  economic  influences  of  the  depreciation  which 
was  assumed  to  have  taken  place ;  nor  even  to  inquire 
whether  silver  had  fallen  in  relation  to  commodi- 
ties. The  work  of  the  Committee  was  limited  to  the 
causes  of  the  depreciation  of  silver  in  terms  of  gold, 
and  to  the  effects  of  this  upon  the  Indian  exchange. 


DZAfONE  T1ZA  TlON.  1 79 

To  that  view  of  their  functions  the  Committee  held 
strictly.  In  their  report  they  say  the  questions 
referred  to  them  "did  not  include  an  investigation  as 
to  what  measures,  if  any,  legislative  or  administrative, 
might  be  contemplated  as  expedient  or  necessary 
under  the  circumstances." 

The  Committee  was  presided  over  by  Rt.  Hon. 
George  J.  Goschen,  a  practical  banker,  the  author  of 
a  most  meritorious  work  on  Foreign  Exchanges,  and 
of  other  important  economic  and  financial  essays  and 
reports,  and,  since  that  time,  member  of  more  than 
one  cabinet  in  the  government  of  England.  Among 
the  members  were  Prof.  Fawcett,  Mr.  Baxter,  Mr. 
Hubbard,  and  Mr.  Cave.  Within  the  scope  of  their 
commission,  the  Select  Committee  examined  a  num- 
ber of  witnesses,  among  whom  were  Mr.  (now  Sir) 
Robert  Giffen,  Mr.  Bagehot,  Mr.  Ernest  Seyd,  Mr. 
Peitsch,  Mr.  Pixley,  and  Sir  Hector  Hay.  The  find- 
ings of  the  Committee  were  as  follows: 

"  That  the  fall  in  the  price  of  Silver  is  due  to  the  following 
causes : 

"  (i)  To  the  discovery  of  new  Silver  Mines  of  great  richness 
in  the  state  of  Nevada.* 

"  (2)  To  the  introduction  of  a  Gold  currency  into  Germany 
in  place  of  the  previous  Silver  currency.  This  operation  com- 
menced at  the  end  of  1871. 

"  (3)  To  the  decreased  demand  for  Silver  for  export  to  India. 
It  should  be  added — 

"  (4)  That  the  Scandinavian  Governments  have  also  substi- 
tuted Gold  for  Silver  in  their  currency. 

*  The  Comstock  Lode  was  discovered  in  1859  ;  the  Belcher 
Bonanza  in  1864  ;  the  Chollar-Potosi  in  1865  ;  the  Hale  &  Norcross 
Bonanza  in  1866.  (H.  L.  Nelson,  Sound  Currency  Tract.) 


1 80  BIME  TA  LLISM. 

"  (5)  That  the  Latin  Union,  comprising  France,  Belgium, 
Switzerland,  Italy,  and  Greece,  have  since  1874  limited  the 
amount  of  Silver  to  be  coined  yearly  in  the  Mints  of  each  mem- 
ber of  the  Union,  suspending  the  privilege  formerly  accorded 
to  all  holders  of  Silver  bullion,  of  claiming  to  have  that  bullion 
turned  into  coin  without  restriction. 

"  (6)  That  Holland  has  also  passed  a  temporary  act  prohib- 
iting, except  on  account  of  the  Government,  the  coining  of 
Silver,  and  authorizing  the  coining  of  Gold."  (p.  iv.) 

The  Committee  did  not  undertake  to  weigh  nicely 
the  proportional  share  of  each  of  these  several  causes, 
but  in  a  separate  paragraph  group  them  as  follows: 
"  It  will  be  observed  that  two  sets  of  causes  have  been 
simultaneously  in  operation.  The  increased  produc- 
tion of  the  newly-discovered  mines,  and  the  surplus 
silver  thrown  on  the  market  by  Germany,  have  affected 
the  supply.  At  the  same  time  the  decreased  amounts 
required  for  India,  and  the  decreased  purchases  of 
silver  by  the  members  of  the  Latin  Union,  have 
affected  the  demand.  A  serious  fall  in  the  price  of 
silver  was  therefore  inevitable." 

A  great  deal  of  importance  was  attached  to  the 
recent  increase  of  silver  production  in  the  United 
States.  At  the  time  the  German  Government  took  its 
action,  and  even  at  the  time  when  the  French  mints 
interposed  a  nine  months'  delay  between  the  receipt 
of  bullion  and  its  coinage,  that  increase  had  not  be- 
come portentous,  the  rise  being  from  about  50  millions 
for  the  average  of  eight  years  closing  in  1870  to  about 
66  millions  for  the  average  of  the  five  years  next 
ensuing.  But  immediately  after  1875,  silver  produc- 
tion took  a  great  leap  upwards,  the  figures  being  for 
1876,  the  year  in  which  the  Select  Committee  sat,  91 


DEMONS  TIZA  TION.  1 8 1 

millions.  It  was  natural,  therefore,  that  such  an  in- 
crease, though  by  no  means  equal  to  that  which  had 
taken  place  in  the  production  of  gold  at  the  middle  of 
the  century — five-fold  in  four  years — should  greatly 
impress  the  minds  of  the  witnesses  and  of  the  Com- 
mittee ;  and  it  was  not  unreasonable  that  they  should 
anticipate  a  still  further  increase,  which  in  fact  became 
the  case,  silver  production  passing  the  lOO-million 
mark  in  1882. 

But  while,  as  has  been  said,  it  was  not  unnatural 
that  this  expectation  should  influence  the  minds  of 
the  Committee,  we  see  at  this  stage  of  monetary  dis- 
cussion, just  as  we  saw  in  the  preceding  epoch  and  as 
we  have  lived  to  see  it  again,  a  failure  on  the  part  of 
nearly  all  economic  thinkers  to  do  justice  to  ''the 
modesty  of  nature  " — that  principle  which,  operating 
universally  throughout  human  life,  prevents  things 
from  ever  becoming  as  good  as  it  was  hoped  they 
would  be,  or  as  bad  as  it  was  feared  they  would  be. 
In  regard  to  no  other  human  interest  than  the  one 
under  consideration  does  this  principle  seem  to  apply 
with  greater  force.  Owing  to  the  nature,  the  mode  of 
occurrence,  and  the  distribution  of  the  deposits  of  the 
precious  metals,  we  have  within  our  own  century 
witnessed  several  successive  instances  of  the  arrest  or 
the  gradual  or  even  abrupt  decline  of  production,  after 
short  periods  of  intense  activity.*  No  such  confidence 

*  "  So  far  as  bimetallism  in  the  past  goes,  one  must  recollect  that 
the  bimetallic  scheme  was  extremely  fortunate  in  having  new  sup- 
plies alternately  of  gold  and  silver;  and  I  quite  admit  that  the  fixed- 
ratio  mintage  [see  p.  206,  post\  can  be  sustained  permanently  if 
the  mines  will  only  obligingly  yield  us  gold  and  silver  alternately." 


1 82  BIMETALLISM. 

in  ' '  the  modesty  of  nature  ' '  relieved  the  apprehensions 
of  the  economists  and  financiers  of  Europe  during  the 
continuance  of  the  great  flood  of  gold.  Even  in  1876, 
it  seemed  to  the  vast  majority  of  intelligent  men  that 
silver  might  continue  indefinitely  to  increase.  We, 
however,  have  lived  to  see  its  production  checked,  and 
gold  again  come  to  the  fore.  So  well  is  this  now 
understood  to  be  the  most  probable  result,  in  any  case 
of  exaggerated  production  of  one  or  the  other  of  the 
money  metals,  that  we  find  a  great  economic  geologist 
like  Dr.  Suess,  of  Vienna,  confidently  allowing  the 
South  African  fields  of  to-day  somewhere  between 
fifteen  and  twenty-five  years  of  maximum  activity.* 

Regarding  the  second  inquiry  assigned  them,  name- 
ly, the  effects  of  the  depreciation  of  silver  upon  the 
Indian  exchange,  the  Select  Committee  gathered  much 
evidence  and  reported  with  great  fulness;  but  the 
aspects  of  the  subject  thus  presented  are  of  far  less 

(Marshall,  Herschell  Commission,  1888,  No.  9730,  p.  n.)  For  the 
reasons  given  in  the  text,  I  am  not  disposed  to  look  on  these  alter- 
nations in  the  production  of  the  precious  metals  as  mainly  a  mat- 
ter of  "fortune."  I  look  at  them,  the  rather,  as  occurring 
through  the  nature  of  things. 

*  "We  are  on  the  eve  of  an  increase  in  the  production,  which 
may  last  ten,  fifteen,  or  even  twenty-five  years.  Perhaps  it  may 
not  last  longer  than  the  maxima  of  the  Californian  and  Australian 
production,  because  mining,  though  more  extended,  is  now  pushed 
forward  more  energetically."  (Letter  to  Dr.  Otto  Arendt.) 
After  referring  to  Dr.  Suess'  views  regarding  the  future  pro- 
duction of  gold,  Mr.  L.  L.  Price  {Economic  Journal,  Dec.  1895,  p. 
566)  says  :  "  The  fact  is  that  all  prediction  of  the  future  is  slip- 
pery, and  that  it  is  precisely  because  it  is  slippery  that  bimetallism 
recommends  itself  as  furnishing  a  standafd  more  stable  than  that 
of  monometallism." 


DEMON E  TIZA  TION.  1 83 

interest  to  Americans  than  to  Englishmen.  We  shall, 
at  a  later  period,  see  the  effects  of  the  depreciation  of 
silver  upon  exchange  with  Eastern  nations,  as  influenc- 
ing their  production  and  trade,  occurring  in  a  form 
more  interesting  to  us  than  the  loss  of  revenue  to 
the  alien  government  of  India,  or  the  griefs  of  ex- 
Indian  Civil  Servants  and  retired  military  officers  liv- 
ing on  silver  pensions  at  home.  I  will  quote  only  one 
paragraph  from  the  evidence  given  before  the  Com- 
mittee. It  is  a  statement  of  Mr.  Walter  Bagehot: 

"A  great  number  of  States  which  are  grouped  together  in 
what  is  called  the  Latin  Union  have  ceased  to  coin  silver,  ever 
since  the  year  1874,  in  the  same  manner  which  they  did  before. 
.  .  If  it  had  not  been  for  that  change  of  policy,  all  the  silver 
which  is  now  flooding  the  London  market  and  lowering  the 
price  would  have  been  long  since  in  the  mints  of  those  coun- 
tries ;  it  would  have  released  gold  from  them,  and  the  com- 
bined effect  of  the  two  operations  would  have  been,  that  the  com- 
parative value  of  gold  and  silver  -would  have  been  very  little 
altered,  probably  not  at  all." 

THE   UNITED    STATES   AND   DEMONETIZATION. 

Turn  we  now  to  the  United  States.  The  project 
of  an  international  money  had  long  possessed  a  certain 
attraction  to  the  minds  of  many  Americans,  both 
economists  and  statisticians  in  private  life  and  states- 
men in  public  office.  We  have  seen  that  Mr.  Ruggles 
advocated  the  cause  of  gold  monometallism  at  Paris 
in  1867.  He  laid  before  the  Conference  a  letter  from 
the  Hon.  John  Sherman,  of  Ohio,  in  which  similar 
views  were  presented.  At,  I  think,  the  next  succeed- 
ing session  of  Congress,  Mr.  Sherman  presented  a 
measure  intended  to  carry  out  the  proposals  of  the 


1 84  BIME  TA  LLISM. 

Conference,  which,  however,  did  not  become  a  law. 
Ever  since  1862,  the  United  States  had  been  under 
the  regime  of  inconvertible  paper  money.  Neither 
gold  nor  silver  was  in  circulation,  to  any  appreciable 
degree.  The  interest  of  the  people  in  the  question  of 
the  relations  between  gold  and  silver  in  the  coinage 
was  at  a  minimum,  alike  from  the  cause  just  referred 
to  and  from  the  impatience  characteristic  of  Ameri- 
cans which  leads  them  to  take  up  subjects  with  great 
fervor  and  drop  them  after  a  while  with  complete 
indifference.  In  1873  a  revision  of  the  coinage  laws 
of  the  United  States  was  undertaken  by  Congress.* 
By  an  act  of  February  12,  the  dollar-piece  was  omitted 
from  the  list  of  silver  coins.  This  is  known  to  Free- 
Silver  men  as  "  The  Crime  of  1873."  The  act  of  1873 
did  not  take  away  the  legal-tender  power  of  any  silver 
dollars  actually  in  existence.  By  an  act  of  June, 
1874,  however,  giving  effect  to  a  revision  of  the 
general  statutes,  the  legal-tender  power  of  all  silver 
coins  was  restricted  to  an  amount  not  exceeding  $5  in 
any  one  payment.  Regarding  the  allegation  that  the 
result  above  described  was  due  to  a  combination  of 
rascally  contrivance  and  rascally  connivance,  I  refer 
to  my  article  in  the  Chicago  Journal  of  Political  Econ- 
omy, March,  1893.  I  quote  the  following  paragraph: 

"  But,  while  I  am  thus  disposed  to  discredit  the  allegation  of 
fraud  and  of  sinister  motive,  so  bitterly  urged  by  the  silver 
men,  it  not  the  less  seems  to  me  that  they  have  a  grievance. 
No  man  in  a  position  of  trust  has  a  right  to  allow  a  measure  of 
such  importance  to  pass  without  calling  attention  sharply  to  it, 
and  making  sure  that  its  bearings  are  fully  comprehended.  And 

*  Movement  in  this  direction  had  been  in  progress  since  1870. 


DEMONE  TIZA  TION.  1 8  5 

no  man  who  did  not  know  that  the  demonetization  of  silver  by 
the  United  States  was  a  measure  of  transcendent  importance 
had  any  right  to  be  on  such  committee  or  to  put  his  hand  to  a 
bill  which  touched  the  coinage  of  a  great  country.  Every  one 
knows  that  but  few  members  upon  the  floor  of  Congress  read 
the  text  of  one  in  twenty  of  the  bills  they  have  to  pass  upon  ; 
and  it  is  the  duty  of  the  committees  dealing  with  any  class  of 
subjects  to  see  to  it  that  every  proposed  change  is  fully  ex- 
plained and  that  the  attention  of  the  House  and  of  the  country 
is  fairly  called  to  it.  They  are  not  discharged  of  their  obliga- 
tions simply  by  giving  members  an  opportunity  to  find  it  out  for 
themselves.  If  this  be  a  requirement  of  ordinary  political  hon- 
esty, much  more  is  it  the  dictate  of  political  prudence.  An 
important  change  in  the  money  or  in  the  industrial  system  of  a 
nation,  if  effected  without  full  and  free  and  thorough  discus- 
sion, even  though  no  surprise  or  concealment  be  used,  is 
almost  certain  to  be  subsequently  challenged.  'Things,'  says 
Bacon,  '  will  have  their  first  or  second  agitation  :  if  they  be  not 
tossed  upon  the  arguments  of  counsel,  they  will  be  tossed  upon 
the  waves  of  fortune,  and  be  full  of  inconstancy,  doing  and 
undoing,  like  the  reeling  of  a  drunken  man.'  " 

But  if  the  legislation  of  1873  and  1874,  regarding 
silver,  passed  without  popular  observation,  it  was  des- 
tined to  receive  a  full  share  of  public  attention  a  little 
later.  As  the  effects  of  demonetization  upon  prices 
came  to  be  more  and  more  evident,  an  agitation  began 
which  has  continued,  with  little  abatement,  to  the 
present  time.  The  silver  question  became  a  dis- 
turbing element  of  great  force  in  American  politics. 
Unquestionably  the  vast  majority  of  the  people  re- 
gretted the  demonetization  of  silver  and  desired  its 
restoration  to  the  rank  of  a  money  metal  with  full 
power;  while  the  timidity  characteristic  of  profes- 
sional politicians  caused  many  to  range  themselves  on 
this  side  without  regard  to  their  convictions.  In  1876 


1 86  BIMETALLISM. 

Congress  provided  for  the  appointment  of  a  Commission 
to  investigate  the  subject.  Three  Senators  and  three 
Representatives,  with  Prof.  Francis  Bowen,  of  Har- 
vard College,  and  Mr.  W.  S.  Groesbeck,  of  Cincinnati, 
made  up  the  Commission.  Prof.  Laughlin  says  it  was 
"packed  "  to  secure  a  report  favorable  to  bimetallism. 
Considering  the  large  majority  in  each  House  of  Con- 
gress favorable  to  that  object,  the  use  of  the  term 
hardly  seems  appropriate.  The  work  of  the  Commis- 
sion does  not  require  any  extended  notice.  The 
matter  was  passionately  discussed ;  most  of  the  evi- 
dence taken  fell,  in  breadth  of  knowledge  and  in 
appreciation  of  economic  laws,  below  that  presented 
in  investigations  we  shall  have  later  to  consider. 
The  majority  report,  which  was  strongly  bimetallist, 
was  not  of  an  especially  commanding  character. 
The  minority  report,  signed  by  two  members,  Prof. 
Bowen  and  General  Randall  Gibson,  contains  a  per- 
fectly respectable  statement  of  the  monometallist 
view.  Ex-Gov.  Boutwell,  of  Massachusetts,  pre- 
sented a  brief  report,  dissenting  from  the  general 
opinion  of  the  Commission  and  urging  that  a  con- 
ference of  the  nations  be  called,  to  take  the  subject 
into  consideration.  But,  while  we  cannot  assign 
any  high  rank  to  the  American  report  of  1876,  as 
a  discussion  of  the  large  and  difficult  questions  at 
issue,  it  had  the  effect  of  arousing  public  attention  and 
initiating  a  popular  agitation  which  did  not  cease 
until,  in  1878,  an  Act  of  February  28th,  commonly 
known  as  the  Bland  bill,  but  more  properly  as  the 
Allison  bill,  remonetized  the  silver  dollar  and  provided 
for  the  coinage  of  a  minimum  of  two  million,  a  maxi- 


DEMON E TIZA  TION.  1 87 

mum  of  four  million  dollars'  worth  of  silver  bullion 
per  month.  The  President  was  empowered  to  invite 
other  nations  to  meet  in  conference,  to  consider  the 
relations  of  gold  to  silver.  The  proceedings  of  this 
conference  will  begin  the  next  chapter. 

A  word  regarding  the  Bland  bill.  The  remonetiza- 
tion  of  silver  in  1878  was  just  and  proper,  from  the 
point  of  view  of  the  bimetallist.  If  the  people  of  the 
United  States  did  not  really  intend  to  demonetize  silver 
in  1873-74, — and  it  is  clear  they  did  not, — then  it  was 
their  duty  to  set  the  matter  right.  It  was  well  that  the 
silver  dollar  should  be  restored  to  the  list  of  coins  of  full 
legal-tender  power.  This  having  been  done,  Congress 
should  have  provided  for  striking  just  so  many  of 
these  pieces  as  might  be  needed  for  souvenirs  and 
numismatic  collections.  The  provision  of  the  Act  of 
February  28th  for  the  actual  coinage  of  two  millions, 
a  month,  as  a  minimum,  was  bad  policy,  from  every 
point  of  view.  It  was  so  considered  by  the  most 
intelligent  bimetallists  here,  and  was  so  esteemed  by 
the  leading  bimetallists  of  Europe.  For  the  United 
States  to  go  at  all  into  the  market  for  silver,  as  a 
buyer,  was  a  gigantic  blunder.  We  simply  put  our 
own  fingers  in  the  door,  and  took  the  squeezing  which 
belonged  to  the  nations  of  Europe,  and  especially 
Germany  and  England,  the  countries  which  had  most 
to  do  with  bringing  about  demonetization  and  which 
were  certain  to  suffer  most  from  a  fall  of  the  price  of 
silver.  Just  so  far  as  the  influence  of  our  act  extended 
— and  two  millions  a  month  allowed  a  very  consider- 
able effect  to  be  produced  upon  the  market — it  was 
in  the  direction  of  diminishing  the  interest  European 


1 88  BIMETALLISM. 

countries  might  have  in  restoring  silver  to  its  rank  as 
a  money  metal,  from  which  it  had  been  violently 
thrown  down  by  force  of  law.  The  impolicy  of  the 
coinage  feature  of  the  Bland  bill  was  not  only  evident 
in  advance ;  it  was  distinctly  felt  by  the  delegates  who 
represented  this  country  in  the  Conference  of  1878, 
as  I  can  personally  testify.  The  United  States  had 
practically  given  themselves  away.  Having  already 
entered  upon  a  course  of  extensive  coinage,  we  had 
not  left  ourselves  anything  "to  trade  with,"  in  nego- 
tiations with  foreign  countries.  Had  we  gone  into 
the  Conference  prepared  to  say,  "We  will  coin  two 
millions  a  month,  or  four  millions,  or  six  millions,  if 
you,  on  your  part,  will  do  thus  and  so,"  the  situation 
would  have  been  much  more  favorable. 

Not  only  was  the  coinage  feature  of  the  Bland  bill 
highly  impolitic  from  what  may  be  called  the  diplo- 
matic point  of  view;  but  it  has  proved  prejudicial 
from  the  point  of  view  of  public  discussion.  Through 
the  influence  of  that  Act,  and  of  the  Sherman  Act  of 
1890,  the  fall  of  silver  was  greatly  postponed,  the  result 
which  otherwise  would  have  been  reached  in  a  few 
years  being  extended  over  twenty  years.  In  conse- 
quence, the  whole  matter  has  been  confused  to  the 
eye  of  the  observer.  It  has  been  made  possible  for 
the  adversary  and  the  caviller  to  allege  that  the  reason 
for  the  fall  of  silver  from  6od.  an  ounce  to  3od.  has 
been  the  large  silver  production  of  the  interven- 
ing period;  whereas,  if  silver  had  been  allowed  at 
once  to  fall  to  the  bottom,  that  is,  to  fall  as  far  as  it 
would  without  any  interference,  it  would  have  been 
impossible  for  any  one  to  be  so  blind  as  not  to  see,  or 


DEMONE  TIZA  TfOJV.  1 89 

so  uncandid  as  to  refuse  to  admit,  that  the  effect  had 
been  due  to  the  destruction  of  the  bimetallic  system. 
We,  in  this  country,  could  have  borne  the  conse- 
quences of  demonetization  a  great  deal  better  than 
England  or  Germany  or  Holland  or  France.  The 
more  severe  the  pinch  upon  them,  the  greater  would 
have  been  their  interest  to  move  in  the  matter.  There 
is  absolutely  nothing  to  be  said  in  favor  of  this  feature 
of  the  bill  of  Feburary  28,  1878. 


CHAPTER   VII. 

THE    GREAT   DEBATE. 

• 

IT  will  be  remembered  that  by  the  Act  of  February 
28,  1878,  the  Congress  of  the  United  States  author- 
ized the  President  to  invite  a  conference  of  the  nations 
to  consider  the  relations  of  gold  and  silver.  The 
invitation  was  accepted  by  most  of  the  leading  powers; 
and  the  Conference  was  held  in  Paris  during  the 
summer  of  that  year,  under  the  presidency  of  M.  L£on 
Say,*  the  French  Minister  of  Finance,  himself  a  dis- 
tinguished economist.  The  British  commission  was 
especially  notable.  Mr.  Goschen  was  chairman,  with 
Mr.  Henry  Hucks  Gibbs  (now  Lord  Aldenham)  and  Sir 
Thomas  Seccombe  as  his  colleagues.  Mr.  Goschen  had 
been  known  as  more  favorably  disposed  toward  bimetal- 
lism^ both  theoretically  and  practically,  than  the  great 
majority  of  English  statesmen.  This  attitude  he  has 
maintained  down  to  the  present  time.  Mr.  Gibbs  had 
been  Governor  of  the  Bank  of  England,  and  has  long 
been  one  of  its  most  prominent  directors.  Soon  after 
the  Conference,  he  assumed  the  ground  of  uncompro- 

*  Since  this  was  written,  M.  Say  has  died. 

f  In  the  Conference  Mr.  Goschen  declared  that  the  complete 
demonetization  of  silver  portended  a  commercial  crisis  to  which 
no  parallel  could  be  found. 

190 


THE  GREAT  DEBATE.  19! 

mising  bimetallism  and  to  this  day  has  not  ceased  to 
advocate  that  policy.  Sir  Thomas  Seccombe,  like  all 
persons  concerned  with  East  Indian  affairs,  appeared 
at  the  Conference  of  1878  profoundly  desirous  that 
something  should  be  done  to  restore  the  broken  par- 
of-exchange  with  India.  While,  thus,  the  members 
of  the  British  delegation  were  highly  favorable,  in  their 
personal  views,  to  the  object  of  the  Conference,  and, 
while  they  did  everything  they  could  to  encourage 
action  on  the  part  of  others,  their  instructions  pre- 
cluded them  from  compromising  the  position  of  Eng- 
land as  a  gold-standard  nation. 

Germany  had  not  accepted  the  invitation  of  the 
United  States.  Her  act  of  demonetization  was  too 
recent.  The  very  call  of  the  Conference  assumed  that 
grave  evils  had  followed  that  measure;  and,  although 
it  was  impossible  that  any  judgment  should  be  passed 
upon  her  action,  or  any  open  reflections  thereon  made 
in  the  sessions,  the  holding  of  the  Conference  was,  in 
itself,  a  criticism  upon  demonetization.  The  absence 
of  Germany,  taken  in  connection  with  the  fact  that 
the  British  delegates  were  bound  to  make  no  conces- 
sions regarding  the  English  standard,  rendered  it 
impossible,  at  the  start,  that  there  should  be  any 
practical  result.  So  desirous  were  the  delegates  of 
the  nations  represented  to  induce  Germany  to  recon- 
sider her  action,  that  a  recess  was  taken  to  allow  an 
appeal  to  the  government  of  that  country.  The 
new  invitation  was  of  a  pressing  character;  but  Ger- 
many remained  firm. 

While  the  situation  was  thus  practically  a  hopeless 
one,  owing  to  the  absence  of  Germany  from  the  Con- 


192  BIMETALLISM. 

ference  and  the  attitude  of  England  in  the  Conference, 
France  herself  was,  by  reason  of  critical  relations  with 
her  colleagues  of  the  Latin  Union,  not  in  a  position  to 
exercise  strong  leadership.  Switzerland,  under  the 
able  leadership  of  M.  Feer-Herzog,  was  stiff  for  gold 
monometallism;  while  Belgium  was  much  disposed 
to  break  away  from  French  influence.  On  financial, 
political,  and  even  military  grounds,  Belgium  is  ex- 
ceedingly important  to  France.  Had  the  Conference 
been  held  a  year  earlier,  Belgium  would  have  been 
represented  by  a  delegation  of  active,  aggressive 
bimetallists,  among  whom  probably  would  have  been 
found  the  eminent  Prof.  Emile  de  Laveleye,  of  Liege. 
At  the  beginning  of  1878,  however,  occurred  a  politi- 
cal revolution  in  Belgium.  The  Catholic  party  was 
driven  from  power,  and  M.  Frere  Orban  came  in  at 
the  head  of  the  Liberals.  The  revolution  was  not 
economic  in  its  purposes.  But  M.  Frere  Orban  was 
personally  a  strong  and  aggressive  monometallist. 
Hence  it  came  about  that  Belgium  was  represented  by 
a  monometallist  delegation.  The  influence  on  the 
Conference  was  very  great.  Without  Belgium,  the 
monometallist  cause,  proper,  would  have  been  repre- 
sented only  by  Norway  and  Sweden,  and  by  Switzer- 
land, a  state  that  never  coined  a  ten-franc  piece.  The 
defection  of  Belgium  not  only  deprived  the  bimetallist 
cause  of  a  supporting  delegation,  but  substituted  a 
powerful  opposition.  And  that  opposition  was  in  the 
very  camp  of  bimetallism. 

The  delegation  from  the  United  States  was  under 
the  chairmanship  of  ex-Governor  and  Senator  Fenton, 
of  New  York.  His  colleagues  were  Messrs.  Groesbeck 


THE   GREAT  DEBATE.  193 

and  Walker.  Mr.  S.  Dana  Horton,  already  well 
known  by  his  writings  on  bimetallism,  was  secretary; 
and,  on  the  request  of  the  commission,  was  by  the 
Conference  admitted  to  participate  in  the  discussions. 
The  delegation  from  the  United  States  did  their  best; 
but  the  case  was  hopeless,  and  the  situation  itself 
was  not  one  of  great  dignity,  so  far  as  the  Americans 
were  concerned.  France  did  not  desire  to  have  a 
Conference  at  the  time,  knowing  well  that  nothing 
would  come  of  it;  and  some  other  States  had  accepted 
the  invitation  purely  out  of  courtesy.  The  American 
representatives  were  full  of  zeal  and  desired  to  enter 
at  once  into  the  discussion  of  the  general  question. 
Many  delegates,  however,  took  the  position  that  the 
Conference  was  of  a  diplomatic,  and  not  of  an  academ- 
ic, character;  and,  while  they  listened  civilly  enough 
to  whatever  might  be  said,  it  was  evident  that  the 
most  of  them  deemed  the  discussion  out  of  place, 
expected  nothing  to  come  of  it,  and  desired  to  have 
the  business  at  an  end.  Even  from  the  French,  the 
American  delegates  received  little  in  the  way  of  sug- 
gestion or  encouragement.  The  Conference  of  1878 
was  inopportune.  The  experience  of  gold  mono- 
metallism had  not  been  sufficient  to  bring  the  States  of 
Europe  to  the  point  of  action,  though  there  were  few 
which  did  not  already  regret  the  catastrophe  of  1873. 
Moreover,  while  great  losses  had  been  sustained 
in  industry  and  trade,  the  public  mind  of  Europe  was 
somewhat  disposed  to  regard  this  mischief  as  inci- 
dental to  the  transition  from  one  condition  to  another. 
The  idea  of  a  certain  and  rapid  readjustment  was  very 
common.  Few  people,  even  the  most  thoughtful, 


1 94  3 1  ME  TA  LLISM. 

had  any  conception  of  the  length  of  time  and  the 
terribly  grinding  character  of  the  experiences  the 
world  would  have  to  go  through  in  order  to  get  to 
monometallism,  assuming  that  monometallism  were 
possible.  What  would  the  men  of  1878  have  thought 
had  they  known  that,  at  the  end  of  eighteen  years 
more  of  disturbance  and  turmoil,  with  long  periods 
of  depression  and  frequent  sharp  crises,  they  would 
be  told  by  the  leaders  of  their  faith  that  universal 
monometallism  is  impossible;  that  the  transition 
cannot  be  effected;  that  all  which  has  been  suffered 
has  been  in  vain,  so  far  as  progress  to  that  object 
is  concerned ;  and  that  the  nations  are  indefinitely  to 
remain  in  the  condition  of  a  broken  par-of-exchange ! 
In  1 88 1 ,  at  the  simultaneous  invitation  of  the  govern- 
ments of  the  United  States  and  of  France,  another 
International  Monetary  Conference  was  held  in  Paris. 
The  Conference  was  under  the  presidency  of  M.  Ma- 
gnin,  French  Minister  of  Finance.  Fifteen  nations  were 
represented  by  delegates.  Germany,  at  this  time, 
appeared  at  the  Conference.  Ex-Secretary  Evarts, 
ex-Senators  Thurman,  of  Ohio,  and  Howe,  of  Wis- 
consin, with  Mr.  Dana  Horton,  constituted  the 
American  delegation.  On  the  part  of  the  British 
Empire  appeared  Sir  Louis  Mallet;  Mr.  (now  Sir) 
Charles  Fremantle,  of  the  Mint;  Lord  Reay,  repre- 
senting East  Indian  interests;  and  Sir  Alexander 
Gait,  representing  Canadian  interests.  The  delegates 
from  Belgium,  Holland,  and  Sweden  were  men  emi- 
nent for  their  knowledge  of  finance.  Among  the 
French  delegates  appeared  a  figure  which  had  long 
been  conspicuous  in  the  controversy  over  bimetallism, 


THE  GREAT  DEBATE.  19$ 

though  up  to  this  time  without  official  recognition. 
M.  Henri  Cernuschi,*  one  of  the  delegates  of  1881, 
had  from  the  very  first  been  the  most  ardent,  enthusi- 
astic, and  combative  of  the  bimetallist  pamphleteers. 
He  had  come  to  the  United  States  to  testify  before 
the  Commission  of  1876;  and  his  tracts  had  fallen  from 
the  press  with  a  profusion  which  only  his  large  wealth 
and  his  intense  zeal  could  explain.  Others  of  the 
French  delegates  were  M.  Barthemely  St.  Hilaire, 
Minister  of  Foreign  Affairs,  and  M.  de  Normandie, 
Governor  of  the  Bank. 

The  Conference  of  1881  had  somewhat  more  of  a 
raison  d'etre  than  that  of  1878.  Public  sentiment  had 
made  no  slight  progress  in  three  years.  Gold  mono- 
metallism had  been  put  completely  upon  the  defensive. 
The  added  experience  of  the  legitimate  effects  of 
demonetization  had  not  been  sweet,  but  bitter.  The 
world  still  suffered  from  the  "break  of  gauge";  and 
the  term  of  readjustment  seemed  to  'be  lengthening, 
rather  than  shortening,  with  the  lapse  of  time.  The 
appreciation  of  money,  which,  down  to  1878,  had  not 
been  very  marked,  had  now  become  considerable. 
£200,000,000  of  gold  ($1,000,000,000)  had,  accord- 
ing to  the  estimate  of  Sir  Robert  Giffen,  been  taken 
to  allow  the  United  States  to  resume  specie  payments, 
after  a  suspension  of  sixteen  years;  to  provide  the  new 
coinage  of  Germany;  and  to  meet  the  needs  of  other 
European  States,  Holland,  Scandinavia,  and  Italy, 
arising  out  of  the  act  of  demonetization.  Meanwhile 
the  production  of  gold  had  somewhat  declined.  It 

*  M.  Cernuschi  has  died  since  this  was  written. 


196  BIMETALLISM. 

was  manifest  that,  unless  some  remedy  could  be 
applied  to  the  monetary  situation,  the  world  had 
entered  upon  a  protracted  period  of  falling  prices. 
The  discussion  in  the  conference  of  1881,  though  par- 
ticipated in  by  several  men  of  high  rank  in  finance, 
did  not  add  much  to  the  theory  of  the  subject ;  while 
the  time  had  not  yet  come  for  the  practical  solution 
of  the  difficult  problem  of  restoring  the  monetary 
equilibrium.  The  action  of  Germany  was  now  almost 
universally  deplored;  but  the  difficulties  of  applying 
a  remedy  increased,  in  the  view  of  statesmen  and 
financiers,  almost  as  rapidly  as  their  apprehension  of 
the  mischief  which  had  been  wrought.  Perhaps  the 
most  important  contribution  to  the  discussion  was  the 
argument  of  M.  de  Normandie,  Governor  of  the  Bank, 
to  the  effect  that,  while  France  had,  between  1803 
and  1873,  performed  a  vast  service  to  mankind  by 
the  maintenance  of  the  bimetallic  system,  her  own 
national  interests  had  not  been  sacrificed  but  had  been 
promoted  thereby.  M.  de  Normandie  said: 

"  One  sees  demonstrated  by  facts,  with  crushing  evidence, 
the  superiority  of  the  double  over  the  single  standard.  In 
1837-38-39  a  violent  crisis  raged  in  America.  The  federal 
treasury  withdrew  its  deposits  from  the  United  States  Bank, 
and,  to  restore  the  metallic  currency,  inundated  the  English 
market  with  American  paper.  At  London  the  situation  be- 
came extremely  serious,  and  the  metallic  reserve  of  the  Bank 
of  England  fell  from  two  hundred  million  francs  to  seventy- 
five  million.  .  .  .  The  Bank  of  England  was  even  forced  to 
recur  to  the  Bank  of  France,  which  loaned  it  fifty  million 
francs  in  credit  values — itself,  thanks  to  the  French  bimetallic 
system,  scarcely  feeling  any  shock  from  the  catastrophe  at  New 
York  and  London.  In  1848  raged  the  'wheat  crisis,'  common 
to  both  countries.  The  act  of  1844  was  suspended  in  England  ; 


THE   GREAT  DEBATE.  197 

loans  ran  only  for  thirty  days ;  numerous  failures  upset  the 
market,  and  discount  rose  to  eight  per  cent.  In  France  the 
crisis  was  promptly  alleviated  by  selling  to  Russia  national 
rentes  to  the  sum  of  fifty  million  francs,  and  discount  was 
maintained  at  five  per  cent.  In  1857  a  new  monetary  crisis, 
answering  to  the  crisis  in  America,  occurs  in  France  as  in  Eng- 
land ;  and  this  time,  too,  it  is  much  the  less  intense  on  the  French 
side  of  the  Channel.  The  Bank  of  France  is  forced  to  raise  its 
rate  of  discount  to  ten  percent.,  but  only  fora  fortnight;  while 
the  Bank  of  England,  whose  gold  had  been  in  some  sort 
drained  by  the  United  States,  sees  itself  constrained  to  main- 
tain for  six  weeks  its  discount  at  the  excessive  rate  of  ten  per 
cent. 

"  In  1866,  through  the  imprudent  over-development  of  socie- 
ties with  limited  responsibility,  a  new  monetary  crisis  mani- 
fests itself,  this  time  more  intense.  The  Bank  of  England,  at- 
tacked by  the  withdrawal  of  specie  from  circulation  and  by 
the  exhaustion  of  its  note  reserve,  again  obtains  the  suspension 
of  the  act  of  1844  ;  and  the  rate  of  its  discount  varies,  between 
January  and  the  following  July,  between  six,  eight,  and  ten  per 
cent.  During  this  same  year  the  mean  rate  of  discount  at  the 
Bank  of  France  is  not  above  four  and  a  half  per  cent.  Thus, 
in  all  the  crises  that  have  arisen,  at  epochs  so  diverse,  in  cir- 
cumstances so  different,  one  sees  the  Bank  of  France  less  dis- 
tressed than  the  Bank  of  England.  In  forty-five  years,  from 
1837  to  1881,  the  former  modifies  the  rate  of  discount  only  one 
hundred  times;  the  latter  does  this  two  hundred  and  ninety- 
two  times.  We  may  affirm  without  rashness  that  the  French 
monetary  system  is  not  without  influence  in  this  result.  The 
power  which  France  possesses  of  recurring,  alternately  or 
simultaneously,  to  the  two  metals  permits  her  not  only  to  em- 
ploy the  one  or  the  other  according  to  circumstances,  and  to 
allay  the  effects  of  their  alternating  scarcity,  but  also  to  come 
to  the  relief,  not  without  profit  to  herself,  of  those  of  her 
neighbors  who  want,  now  gold,  now  silver." 


198  BIMETALLISM. 

THE    ENGLISH    COMMISSIONS. 

After  1 88 1  the  world  enjoyed  a  rest  of  eleven  years 
from  international  monetary  conferences,  although  a 
sort  of  conference  was  held  in  Paris  in  1889,  in  con- 
nection with  the  Exposition;  but  the  discussion  of  the 
silver  question  was  carried  on  more  earnestly  than 
ever.  The  years  1881-85  witnessed  great  changes 
in  the  public  sentiment  of  Europe,  especially  in 
England.  In  the  latter  country  the  prestige  which 
monometallism  had  enjoyed  since  1816  was  greatly 
impaired.  There  had  been  a  remarkable  loss  by  death 
among  the  older  economists;  and  the  vacant  places 
had  been  filled  by  a  group  of  comparatively  young, 
but  very  able,  thinkers  and  teachers,  who  were,  with- 
out an  exception,  distinctly  opposed  to  the  views  of 
their  predecessors,  while  some  of  them  became  active 
and  aggressive  advocates  of  bimetallism,  writing  and 
speaking  freely  upon  the  economic  mischiefs  of 
demonetization.  Among  the  latter  class  may  be  men- 
tioned Prof.  Foxwell  and  Prof.  Shield  Nicholson. 
Among  the  economists  who,  while  not  entering  actively 
into  the  bimetallist  propaganda,  still  expressed  entire 
dissent  from  the  monometallist  view,  and  presented 
considerations  and  arguments  which  told  altogether  on 
the  bimetallist  side,  were  two  who  must  be  named 
with  special  honor — Prof.  Alfred  Marshall,  of  Cam- 
bridge, easily  the  first  economist  among  the  English- 
speaking  nations,  and  Prof.  F.  Y.  Edgeworth,  of 
Oxford  University,  Secretary  of  the  British  Economic 
Association  and  Editor  of  its  Journal,  a  writer  of  the 
mathematical  school  in  economics  who  has  no  superior 
in  any  land. 


THE   GREAT  DEBATE.  199 

The  manufacturing,  agricultural,  and  navigation  in- 
terests of  England,  which  had  suffered  immensely  from 
the  "break  of  gauge,"  the  dislocation  of  exchange 
with  silver-using  countries,  now  began  vigorously  to 
assert  their  right  to  be  considered  in  the  monetary 
policy  of  their  country.  The  loss  of  prestige  on  the 
part  of  gold  monometallism,  as  a  consequence  of  com- 
mercial disorders  following  the  demonetization  of 
silver,  from  which  the  advocates  of  that  doctrine  had 
promised  great  benefits,  was  hastened  by  the  accuracy 
by  which  the  bimetallist  forecasts  of  the  effects  of  that 
policy  had  been  realized.  Regarding  this  Prof. 
Foxwell  remarks  as  follows,  in  his  address  before  the 
National  Club  on  the  27th  of  March,  1895: 

"  Nothing  is  more  instructive  than  to  compare  the  forecasts 
of  such  men  as  Ernest  Seyd,  Wolowski,  Baron  Alphonse  de 
Rothschild,  and  the  bimetallists  generally,  with  those  of  even 
the  ablest  monometallists,  such  as  Jevons  and  Bagehot.  The 
loss  of  the  par-of-exchange,  the  depreciation  of  property,  the 
ruin  of  agriculture,  the  depression  of  trade,  the  very  fall  of  the 
rupee  to  is.,  all  this  was  accurately  foretold  by  Ernest  Seyd  and 
other  bimetallists  before  the  demonetization  began ;  while 
Bagehot  held  in  1876  that  the  Indian  exchange  difficulty  would 
soon  correct  itself,  and  Jevons,  in  1875,  thought  the  price  of 
silver  need  not  fall  further,  and  that  gold  was  not  likely  to  rise. 
As  for  the  City  Editors,  I  do  not  know  how  many  scores  of 
times  they  have  assured  us  that '  prices  had  touched  bottom', 
and  that  silver  would  '  shortly  find  its  natural  value  ' — whatever 
this  may  mean.  If  prevision  is  a  test  of  science,  the  bitnetallist 
explanation  easily  holds  its  own" 

In   1885*  an  increasing  sense  of  the  evils  of  the 

*  There  had  been  earlier  manifestations  of  a  strong  desire  for 
some  action  favorable  to  silver.  Soetbeer,  on  pp.  141-8  of  his 
Litteraturnachweis,  mentions  several, 


200  BIMETALLISM. 

financial  dislocation  which  had  been  brought  about  by 
demonetization,  led  to  the  appointment  of  a  Royal 
Commission  on  the  Depression  of  Trade.  The  Com- 
mission was  presided  over  by  Lord  Iddesleigh,  for- 
merly, as  Sir  Stafford  Northcote,  Chancellor  of  the 
Exchequer.  Among  the  members  were  Mr.  Sclater- 
Booth,  Mr.  R.  H.  Inglis-Palgrave,  Mr.  Hucks 
Gibbs,  Sir  William  Houldsworth,  and  Prof.  Bonamy 
Price.  The  Commission  performed  its  work  with 
remarkable  thoroughness  and  completeness;  and  the 
successive  reports  constitute  one  of  the  best  surveys 
of  the  world's  commerce  to  be  found  in  the  multi- 
tudinous literature  of  the  subject.  These,  however, 
do  not  greatly  concern  the  question  we  are  discussing. 
This  is  not  because  the  Commission  took  a  disparaging 
view  of  the  influence  of  the  demonetization  of  silver 
in  producing  the  depression  of  trade,  which  they  found 
to  be  general,*  and  in  bringing  about  a  fall  of  prices. 
On  the  contrary,  the  Commission  declared  their  belief 
that  there  had  been  "a  continuous  fall  of  prices 
caused  by  the  appreciation  of  the  standard  of  value." 
That  fall  of  prices  the  Commission  found  to  be  one  of 
the  most  important  of  the  causes  operating  to  produce 
the  existing  condition.  I  quote  their  language: 

"  There  can  be  little  doubt  that  production  and  commercial 
enterprise  are  stimulated  to  a  greater  extent  by  rising  than  by 
falling  prices.  Whatever  may  be  the  inconveniences  of  a  rise  in 
prices,  it  certainly  encourages  a  greater  activity  in  production 
and  an  extension  of  credit.  When  prices  are  rising,  capital  is 

*  "  By  this  depression  is  meant  a  diminution,  and  in  some 
cases  an  absence,  of  profit,  with  a  corresponding  diminution  of 
employment  for  the  laboring  classes."  (p.  x,  Final  Report.) 


THE   GREAT  DEBATE.  2OI 

constantly  endeavoring  to  find  new  means  of  employment ;  and 
a  spirit  of  enterprise  animates  all  the  classes  engaged  in  com- 
mercial operations.  In  times  when  prices  are  falling,  on  the 
other  hand,  speculation,  even  of  a  perfectly  legitimate  kind,  is 
checked,  and  production  tends  to  diminish.  Suppose  a 
manufacturer  to  borrow  a  fixed  sum  at  a  fixed  rate  of  interest. 
This  he  has  to  repay,  whatever  the  result  of  his  operations  may 
be.  Meanwhile  prices  may  fall.  Not  only  does  he  buy  his  raw 
material  at  the  higher  price  and  sell  his  goods  at  the  lower ; 
but  he  has  also  to  pay  interest*  and  repay  principal  on  the 
higher  value  ;  and,  in  addition  to  this,  it  is  found  that  wages  do 
not  respond  to  such  movements  as  quickly  as  the  prices  of 
commodities.  The  trader,  too,  is  affected  in  the  same  way ;  he 
does  not  know  what  the  value  of  his  stock  will  be  at  the  year's 
end,  or  what  profit  he  will  be  able  to  secure  upon  his  capital ; 
and,  when  trade  is  crippled,  it  is  natural  that  production  should 
halt."  (p.  xix.) 

So  far  were  Lord  Iddesleigh's  Commission  from 
taking  a  disparaging  view  of  the  influence  of  demoneti- 
zation in  producing  the  results  they  ascertained,  that, 
in  their  Third  Report,  they  addressed  the  Queen  with 
a  statement  that  the  question  of  the  relation  of  the 
changes  in  the  currency  to  the  welfare  of  trade  and 
production  had  come  to  seem  to  them  so  important 
as,  in  their  judgment,  to  require  that  this  subject 
should  be  made  the  matter  of  distinct  investigation, 
at  the  hands  of  an  independent  commission.  Upon 
this  recommendation,  Her  Majesty's  Government,  in 
1886,  constituted  the  Gold  and  Silver  Commission, 
under  the  presidency  of  Lord  Herschell,  formerly  and 
since,  Lord  Chancellor.  The  commission  was  com- 
posed of  twelve  members,  six  of  whom,  the  Chairman, 
Mr.  Courtney,  Lord  Farrer,  Sir  Charles  Fremantle, 

*  See  statement  by  Prof.  Marshall,  in  note  to  page  274. 


202  BIMETALLISM. 

Sir  John  Lubbock,  and  Mr.  Birch,  were  known  as 
gold  monometallists;  six,  namely,  Sir  Louis  Mallet, 
Mr.  Balfour,  Mr.  Chaplin,  Sir  David  Barbour,  Sir 
William  Houldsworth,  and  Sir  Samuel  Montagu,  as 
bimetallists.  Among  those  who  gave  testimony  before 
the  Commission — in  some  cases  with  very  great  fulness, 
in  single  instances  testimony  which  would  make  a 
respectable  volume — were  the  following:  Mr.  Gibbs, 
Mr.  Grenfell,  Mr.  (now  Sir)  Robert  Giffen,  Prof. 
Marshall,  Prof.  Nicholson,  Lord  Bramwell,  Sir  Evelyn 
Baring,  Mr.  Pixley,  Mr.  Inglis-Palgrave,  Mr.  Samuel 
Smith,  Mr.  Sauerbeck,  Mr.  Henry  Dunning  Macleod, 
Sir  Hector  Hay,  Mr.  Bertram  Currie,  and  Prof. 
Roberts  Austen,  the  last  of  whom  spoke  on  the  geo- 
logical and  metallurgical  problems  connected  with  the 
supply  of  the  precious  metals. 

The  Herschell  Commission  carried  on  its  investiga- 
tion with  a  thoroughness  exhibited  in  no  previous 
inquiry  into  the  money  question ;  and  collected  a  body 
of  information  and  opinion  which  makes  its  reports, 
issued  successively  in  1887  and  1888,  a  mine  of  wealth 
for  the  financier  and  the  economist.*  The  ability 

*  Among  the  results  of  this  and  other  British  investigations 
has  been  the  serious  impairment  of  the  prestige  formerly  attach- 
ing to  estimates  of  the  existing  stocks  of  the  precious  metals,  put 
forth  often  by  persons  deemed  competent.  In  the  earlier  inves- 
tigations such  estimates  cut  a  great  figure  ;  but  they  are  now 
greatly  discredited.  Mr.  Bagehot,  indeed,  in  1876,  expressed  a 
very  unfavorable  opinion  regarding  them.  Ques.  "  Have  you  ex- 
amined the  statistics  which  are  available  to  the  public  with  regard 
to  the  aggregate  amount  of  silver  and  gold  in  various  countries?" 
Ans.  "  I  have  examined  them  ;  but  I  regret  to  say  that  I  do  not 
think  they  are  of  such  value  as  to  be  made  the  basis  of  sound 
reasoning  in  such  investigations  as  this.  It  appears  to  me  that 


THE   GREAT  DEBATE.  203 

which  was  brought  to  bear  on  the  question,  some  of 
whose  aspects  had  only  recently  come  into  view,  the 
care  with  which  the  exhibits  offered  had  been  pre- 
pared, the  severe  scrutiny  to  which  statistical  results 
were  subjected,  the  application  to  the  monetary 
problem  of  the  best  results  of  modern  economic 
thought,  all  combine  to  make  these  volumes  valuable 
in  a  degree  it  would  be  difficult  to  express. 

The  Commission  made  three  reports,  commonly 
known  as  the  First,  the  Second,  and  the  Final  report. 
The  Final  Report,  which  contains  the  conclusions  of 
the  Commission,  embraces  three  parts:  first,  a  state- 
ment in  which  all  twelve  members  joined ;  second,  a 
statement  signed  by  the  six  monometallists  as  a 
group;  third,  a  statement  by  the  bimetallists  of  the 
Commission.  To  these  were  added  notes  by  in- 

you  neither  know  with  certainty  the  present  stock  of  silver  in  the 
world,  nor  are  you  able  to  estimate  the  probable  augmentation 
of  it  ;  nor  do  you  know  the  effect  which  any  given  percentage, 
say  10  per  cent  on  the  stock,  would  have  upon  its  value.  The 
last  part  is  a  matter  which  has  not  even  been  discussed,  I  think." 
Ques.  "You  would  question,  after  all  the  study  you  have  given 
to  the  subject,  both  the  accuracy  and  the  real  substantial  value 
of  figures  that  go  into  the  aggregate  amount  of  silver  and  gold  in 
the  world,  and  the  proportions  of  the  metals  to  each  other  ?  "  .  .  . 
Ans.  "  I  do  not  believe  they  are  worth  the  paper  on  -which  they  are 
written.  I  do  not  consider  that  any  one  knows  anything  about 
them,  or  has  the  means  of  knowing."  (Committee  on  the  Depre- 
ciation of  Silver,  Nos.  1390,  1391,  p.  65.) 

Prof.  Jevons  and  Sir  Robert  Giffen  subsequently  corroborated 
Mr.  Bagehot's  view.  An  equal  objection  does  not  lie  to  estimates 
of  annual  production,  though  of  these  Prof.  Jevons  remarks  : 
"  Even  the  apparently  precise  returns  of  produce  and  amounts 
transmitted  are  probably  most  inaccurate."  (Investigations,  etc., 

P-  3!3-) 


204  BIMETALLISM. 

dividual  members,  one  signed  jointly  by  Sir  John 
Lubbock  and  Mr.  Birch,  another  by  Sir  David  Bar- 
bour,  and  another  by  Sir  Louis  Mallet.  I  have,  in  a 
previous  chapter,  quoted  *  the  admission,  by  the  en- 
tire twelve  members,  of  the  efficiency  of  the  bimetallic 
system  in  maintaining  an  approximate  par-of-ex- 
change,  through  a  period  of  seventy  years,  in  spite  of 
important  changes  in  the  production  and  use  of  the 
precious  metals.  That  admission,  which  was  all  any 
bimetallist  could  ask,  was  supplemented  by  the  follow- 
ing declarations  contained  in  the  report  of  the  mono- 
metallist  group: 

107.  "  We  think  that  in  any  conditions  fairly  to  be  contem- 
plated in  the  future,  so  far  as  we  can  forecast  them  from  the 
experience  of  the  past,  a  stable  ratio  might  be  maintained  if 
the  nations  we  have  alluded  tof  were  to  accept  and  strictly 
adhere  to  bimetallism,  at  the  suggested  ratio.t     We  think  that 
if  in  all  these  countries  gold  and  silver  could  be  freely  coined, 
and  thus  become  exchangeable  against   commodities  at  the 
fixed   ratio,  the   market  value  of  silver  as  measured  by  gold 
would  conform   to   that  ratio,  and  not  vary  to  any  material 
extent.  .  .  . 

108.  "  We  do  not  deny  that  it  is  conceivable  that  these  antici- 
pations might  be  falsified  by  some  altogether  unprecedented 
discovery  of  one  or  other  of  the  precious  metals,  and  that  the 
maintenance   of  a  stable   ratio   might  then  become  difficult. 
But  for  practical  purposes  we  think  we  may  put  this  aside  and 
reasonably  act  on  the  assumption  that  no  such  grave  dislocat- 
ing cause  is  likely  to  arise.     We  have  already  drawn  attention 
to  the  fact  that,  during  the  time  covered  by  the  great  gold  dis- 

*  See  pp.  135,  136. 

f  The  United  Kingdom,  Germany   the  United  States,  and  the 
Latin  Union. 

|  "  Approximating  to  the  market  ratio." 


THE   GREAT  DEBATE.  2O$ 

coveries,  the  production  of  silver  continued  undiminished,  and 
that  of  late  years,  when  gold  is  said  to  have  been  appreciating, 
the  production  of  silver  has  increased." 

119.  "Apprehensions  have  been  expressed  that,  if  a  bi- 
metallic system  were  adopted,  gold  would  gradually  disap- 
pear from  circulation.  If,  however,  the  arrangement  included 
all  the  principal  commercial  nations,  we  do  not  think  there 
would  be  any  serious  danger  of  such  a  result.  Such  a  danger, 
if  it  existed  at  all,  must  be  remote.  It  is  said,  indeed,  by  some, 
that  if  it  were  to  happen,  and  all  nations  were  to  be  driven  to  a 
system  of  silver  monometallism,  the  result  might  be  regarded 
without  dissatisfaction.  We  are  not  prepared  to  go  this 
length  ;  but,  at  the  same  time,  we  are  fully  sensible  of  the  bene- 
fits that  would  accrue  from  the  adoption  of  a  common  mone- 
tary standard  by  all  the  commercial  nations  of  the  world,  and 
we  are  quite  alive  to  the  advantage  of  the  adoption  by  these 
nations  of  a  uniform  bimetallic  standard,  as  a  step  in  that 
direction." 

The  foregoing  admission,  signed  by  all  the  mono- 
metallist  members,  was  only  qualified  in  the  note  of 
Sir  John  Lubbock  and  Mr.  Birch,  already  referred  to, 
in  which  they  expressed  their  individual  doubt  as  to 
the  possibility  of  maintaining  international  bimetallism 
through  an  indefinite  period  of  time,  in  face  of  all  the 
changes  which  might  occur  in  the  production  of  the 
precious  metals.  Inasmuch  as  these  gentlemen  had 
joined  in  the  statement  that  the  bimetallic  system, 
supported  by  France  alone,  had  sustained  itself 
through  nearly  three-quarters  of  a  century,  in  spite 
of  alterations  in  the  production  and  use  of  the  precious 
metals  of  the  most  tremendous  extent,  we  can  only 
suspect  that  it  was  some  period  much  longer  than 
seventy  years,  or  some  change  in  the  conditions  of 
production  much  greater  than  that  induced  by  the 


2O6  BIME  TA  LLISM. 

Californian  and  Australian  discoveries,  which  they  had 
in  view.  Further  quotations  from  the  monometallist 
part  of  the  Report  may  be  instructive,  especially  with 
reference  to  the  scorn  expressed  by  some  of  the  loftier 
champions  of  monometallism  in  the  United  States 
towards  all  who  show  an  interest  in  the  use  of  silver 
as  money.  English  and  Continental  financiers  and 
statesmen  are  not  too  grand  to  concern  themselves  in 
the  matter. 

"  In  our  opinion  it  might  be  worth  while  to  meet  the  great 
commercial  nations  on  any  proposal  which  would  lead  to  a 
more  extended  use  of  silver,  and  so  tend  to  prevent  the  appre- 
hended further  fall  in  the  value  of  that  metal,  and  to  keep  its  rela- 
tion to  gold  more  stable."  (§135).  .  .  "  Though  unable  to  recom- 
mend the  adoption  of  what  is  commonly  known  as  bimetallism, 
we  desire  it  to  be  understood  that  we  are  quite  alive  to  the 
imperfections  of  standards  of  value,  which  not  only  fluctu- 
ate, but  fluctuate  independently  of  each  other  ;  and  we  do  not 
shut  our  eyes  to  the  possibility  of  future  arrangements  be- 
tween nations  which  may  reduce  these  fluctuations  (§  138.)" 

The  views  and  practical  proposals  of  Prof.  Alfred 
Marshall,  as  offered  to  the  Commission,  constitute  one 
of  the  most  important  contributions  to  the  theory  of 
metallic  money  which  have  been  made  during  the 
great  debate.  As  between  gold  monometallism  and 
bimetallism  in  its  familiar  form,  Prof.  Marshall  is 
wholly  on  the  latter  side.  But  this  eminent  economist 
thinks  there  is  "a  more  excellent  way."  What  we 
know  as  bimetallism  he  terms  "fixed-ratio  mint- 
age," denying  it  the  title  bimetallism,  which,  in  his 
opinion,  "means  that  the  payment  of  every  debt  shall 
be  effected  by  the  delivery  of  certain  amounts  of  both 
metals,  or  of  paper  which  represents  them."  (Her- 


THE  GREAT  DEBATE.  2O? 

schell  Commission,  Appendix  to  Final  Report,  No. 
9705.)  Prof.  Marshall  proposes  the  government  issue 
of  certificates,  each  certificate  standing  for  a  certain 
amount  of  gold  and  a  certain  quantity  of  silver  bearing 
a  legally  adopted  ratio  to  the  gold.  Were  the  French 
ratio  to  be  taken,  a  certificate  would  stand  for  one  part 
of  gold  and  fifteen  and  a  half  parts  of  silver,  actually 
deposited  and  remaining  in  trust  for  the  redemption 
of  the  certificate,  whenever  desired.  A  money  thus 
composed  Prof.  Edgeworth  compares  to  a  linked  bar 
of  silver  and  gold.  The  essential  distinction  between 
this  and  French  bimetallism  he  characterizes  as  follows: 
"  The  arrangement  that  there  should  be  a  joint 
demand  for  gold  and  silver  money  might,  perhaps,  be 
called  symmctallism,  to  distinguish  it  from  the  arrange- 
ment that  there  should  be  a  composite  supply,  which  is 
called  bimetallism.'"  Prof.  Marshall's  proposal  has  re- 
ceived much  attention ;  and  is  certainly  to  be  reckoned 
with  in  the  further  discussion  of  the  means  and 
methods  for  raising  the  world's  trade  and  production 
out  of  the  unfortunate  situation  into  which  they  have 
been  brought  by  the  demonetization  of  silver  and  the 
dislocation  of  international  exchange.  In  the  Septem- 
ber number  of  the  British  Economic  Journal,  for  1895, 
Prof.  Edgeworth  subjects  the  French  system,  usually 
known  as  the  Bimetallic,  and  that  offered  by  Prof. 
Marshall,  which  he  styles  the  Symmetallic,  to  a  severe 
mathematical  treatment,  according  to  various  assump- 
tions; and  finds  that,  in  each  case,  the  latter,  which 
we  may  call  Bullion  Bimetallism,  yields  an  equally 
good  result,  while,  on  certain  assumptions  regarding 
changes  in  supply  or  in  demand,  the  Bullion  plan  is 


208  BIME  TA  LLISM. 

preferable.  So  far  as  the  value  of  money  is  concerned 
Prof.  Edgeworth  finds  that  both  the  symmetallic  and 
the  bimetallic  systems  secure  the  result  of  less  fluctua- 
tion than  that  which  would,  on  the  whole,  occur  in 
the  values  of  the  single  gold  standard  and  the  single 
silver  standard.  In  conclusion,  this  master  of  mathe- 
matical economics  pronounces  in  favor  of  symmetal- 
lism,  as  contrasted  with  bimetallism,  commonly  so 
called,  or  with  either  form  of  monometallism.  The 
one  objection  on  practical  grounds  which  he  acknowl- 
edges is  the  unfamiliarity,  the  strangeness,  which  the 
system  would  bear  to  the  public  mind.  This  last 
objection,  indeed,  might,  and  probably  would,  be 
found  of  force  in  England;  but  in  this  country  we 
have  become  so  well  accustomed  to  the  use  of  metal- 
certificates,  first  of  gold  and  then  of  silver,  that  the 
form  of  the  proposed  money  would  encounter  no 
popular  objection,  if  the  principle  were  once  accepted. 
The  symmetallic  scheme  appears  to  have  been 
adopted  by  Prof.  Foxwell,  the  most  active  champion 
of  bimetallism  among  the  English  economists,  in  his 
reply  to  Lord  Farrer.  Prof.  Foxwell  says:  "  The 
bimetallists  recognize  that  the  situation  has  been 
somewhat  modified  by  the  events  which  have  followed 
1873.  A  moral  shock  has  been  given  to  the  position 
of  silver  by  the  hostile  legislation  of  many  govern- 
ments tumbling  over  one  another  in  a  sauve-qui-peut 
scramble  for  gold;  and  there  has  been  an  increased 
tendency  to  the  use  of  gold  coins  for  pocket-money. 
Hence  they  propose  that  the  restored  bimetallism 
shall  be  founded  on  a  broad  international  basis;  and 
that  it  shall  be  planned  rather  upon  the  principle  of 


THE   GREAT  DEBATE.  2Og 

the  Bank  purchases  of  gold  bullion  under  the  Act  of 
1844,  than  upon  the  more  primitive  system  of  coinage, 
so  that  the  existing  circulations  of  the  various  countries 
may  remain  practically  undisturbed." 

It  is  not  to  be  understood  from  the  foregoing  that 
the  suggestion  of  such  a  "linked  bar"  of  gold  and 
silver,  as  the  basis  of  a  true  bimetallism,  is  wholly 
original  with  Prof.  Marshall.  Something  of  this  kind 
was  suggested,  as  a  possible  solution  of  the  question 
of  the  use  of  gold  and  silver  as  money,  by  Sir  James 
Steuart,  at  about  the  middle  of  the  last  century. 
Prof.  Foxwell  attributes  the  origin  of  the  proposed 
monetary  system  to  Ricardo's  Proposals  for  an  Eco- 
nomical and  Secure  Currency.  "  Indeed,  Ricardo 
himself  traces  it  still  further  back,  remarking  that  it 
resembles  the  old  practice  of  the  Banks  of  Amsterdam 
and  Hamburg.  The  merit  of  applying  the  method  to 
the  case  of  a  bimetallic  system  seems  to  belong  to 
Mr.  Alexander  Baring  in  1819.  Similar  schemes  were 
brought  forward  by  Huskisson  in  1826  and  Haggard 
in  1840.  The  suggestion  was  repeated  by  Mr.  Pierson, 
now  Governor  of  the  Bank  of  Holland,  at  the  Confer- 
ence of  1 88 1." — Address  before  the  National  Liberal 
Club,  pp.  24,  25. 

On  one  of  the  points  which  Prof.  Marshall  adduces 
as  showing  the  superiority  of  Bullion  Bimetallism  over 
Coinage  Bimetallism,  I  must  confess  myself  somewhat 
sceptical.  His  argument  is  that  the  recently  developed 
tendency  of  governments  to  hoard  gold,  especially  for 
war  purposes,  so  conspicuous  in  the  case  of  Russia, 
but  also  seen  in  the  accumulations  of  Austria,  Ger- 
many, and  France,  might  prove  fatal  to  Coinage 


2 IO  BIMETALLISM. 

Bimetallism,  while  it  would  be  reduced  to  a  minimum, 
or  altogether  disappear,  under  Bullion  Bimetallism. 
In  reply  to  the  suggestion  that  such  hoarding  of  gold 
by  governments  is  of  recent  origin ;  that,  under  bi- 
metallism, that  is,  while  the  French  system  continued 
in  force,  it  took  place  only  in  a  very  limited  degree 
and  that  almost  wholly  on  the  part  of  a  single  nation ; 
and  that,  therefore,  it  presumably  would  not  operate 
under  a  restored  bimetallism,  Prof.  Marshall  expresses 
his  belief  that  the  change  in  this  particular  is  a  per- 
manent one,  "due  to  changes  in  the  methods  of  war, 
and  not  in  the  circumstances  of  the  metal"  ;  and  that 
"the  experiences  of  the  [recent]  Continental  wars 
have  altered  the  views  of  governments  very  much  on 
the  subject  of  gold."  He  adds:  "I  think  that  part 
of  Germany's  fondness  for  gold  arose  after  the  war 
with  Austria." 

On  this  point  my  convictions  do  not  go  with  Prof. 
Marshall's.  Thirty  years  ago  "a  military  chest  "  was 
regarded  as  an  anachronism,  a  relic  of  semi-barbarous 
conditions.  A  country  prepared  for  war  by  having 
its  finances  in  a  sound  state,  and  by  accumulating 
wealth  in  general,  'and  not  in  special  forms,  except  as 
regarded  the  materiel  for  the  equipment  of  armies 
and  navies.  Prussia,  alone  of  all  advanced  nations, 
maintained  a  war-chest.  That  this  was  of  conven- 
ience, on  the  outbreak  of  hostilities  with  Austria,  in 
1866,  there  can  be  no  doubt;  but  that  it  was,  in  any 
degree,  an  essential  condition  of  Prussia's  triumph  in 
the  Seven  Weeks'  War  I  do  not  believe.  Possibly, 
that  instance  may  have  had  some  share  in  inciting  the 
Germany  of  to-day,  with  Russia,  Austria,  and  France, 


THE   GREAT  DEBATE.  211 

to  make  large  accumulations  of  treasure,  with  a  view 
to  a  possible  crossing  of  the  Danube  or  the  Rhine; 
but  my  conviction  is  strong  that  the  present  situation 
is  abnormal — due  to  "  the  struggle  for  the  coverlid  of 
gold"  which  has  agitated  the  markets  of  the  world 
ever  since  1873;  that  it  is  the  insufficiency  of  that 
metal  to  meet  the  new  and  extensive  demands  created 
by  the  demonetization  of  silver,  which  has  led  to  the 
result  we  see;  and  that  with  the  re  establishment  of  bi- 
metallism, whether  upon  the  old  ratio  or  on  some 
ratio  made  more  favorable  to  gold  out  of  respect  to 
new  conditions,  the  barbarous  hoarding  of  metal  for 
the  purposes  of  war,  a  system  more  worthy  of  Persia, 
under  Darius,  than  of  a  modern  European  nation, 
would  at  once  cease.  But  all  this  is  matter  of  opinion. 

I  have  spoken  above  of  the  possible  restoration  of 
bimetallism,  "whether  upon  the  old  ratio,  or  on  some 
ratio  made  more  favorable  to  gold  out  of  respect  to 
new  conditions."  It  is  not  my  purpose  to  discuss  the 
question  of  the  ratio.  Some  leading  monometallists 
are  exceedingly  anxious  to  have  the  bimetallists  take 
a  position  on  this  subject.  It  depresses  them  exceed- 
ingly that  we  will  not  do  exactly  what  they  want. 

There  are  three  good  reasons  why  bimetallists 
should  refuse  peremptorily  to  take  any  position  regard- 
ing the  ratio  while  the  question  of  the  restoration  of 
bimetallism  remains  in  the  stage  of  discussion.  First, 
because  it  is,  in  general,  good  policy  to  refrain  from 
doing  what  your  opponents  most  desire  you  to  do. 
Secondly,  because  the  question  of  the  ratio  properly 
and  logically  follows  the  determination  of  the  question 
whether  a  strong  and  serious  effort  shall  be  made  to 


2 1 2  BIME  TA  LLISM. 

re-establish  bimetallism.  When  any  sufficient  number 
of  commercial  powers  shall  get  so  far  together  as  to 
agree  that  the  re-establishment  of  that  system  is  of 
predominant  importance,  ^and  shall  reach  the  stage  of 
negotiation  regarding  this  as  an  object  of  common 
interest,  then  will  come  the  time  for  discussing  and 
deciding  the  question  of  the  ratio.  Thirdly,  the  ques- 
tion of  the  ratio  follows  the  decision  and  the  determi- 
nation to  re-establish  bimetallism,  by  more  than  mere 
logical  propriety  and  sequence  in  time.  The  policy 
of  the  ratio  will  itself  necessarily  be  affected  largely 
by  the  number  and  importance  of  the  states  joining  in 
the  arrangement.  Should  England,  France,  Germany, 
Italy,  and  the  United  States,  with  their  financial  allies 
and  dependencies,  give  in  their  adhesion  to  the 
bimetallic  system,  the  old  ratio  could  unquestionably 
be  taken  and  made  good  through  generations  to  come. 
If,  on  the  other  hand,  the  league  were  smaller,  there 
would  be  a  greater  occasion  for  paying  respect  to  the 
consideration  that  the  conditions  of  production  have, 
during  the  past  twenty-five  years,  changed  somewhat 
in  the  direction  of  giving  gold  a  larger  value  in  terms 
of  silver  than  at  any  earlier  date.  The  extent  to 
which  these  changes  in  the  conditions  of  production 
have  been  carried  has  been  monstrously  exaggerated, 
to  a  point  of  downright  dishonesty,  by  a  great  number 
of  monometallist  writers  and  speakers;  but  that  a 
change  has  taken  place  in  the  direction  indicated  is 
not  to  be  questioned. 

While  declining  thus  to  discuss  the  question  of  the 
actual  ratio  to  be  taken  in  any  attempt  to  restore  in- 
ternational bimetallism,  I  do  not  hesitate  to  say  that 


THE   GREAT  DEBATE.  213 

all  talk  about  taking  the  existing  ratio  of  the  market, 
say  30  :  i,  as  the  ratio  for  the  bimetallic  mints,  is 
simply  silly.  Silver  has  fallen  to  30  for  I  of  gold, 
because  of  demonetization.  Remonetization,  even  by 
a  weak  league,  would  necessarily  and  instantly  put 
silver  back  to  somewhere  near  its  former  position. 
Remonetization  by  a  strong  league  would  put  it  clear 
back  and  would  hold  it  there  against  any  but  revo- 
lutionary forces.  Of  course,  if  the  conditions  of  pro- 
duction have  definitively  changed  in  the  direction  of 
giving  gold  a  higher  value  in  terms  of  silver,  even  such 
a  league  would  be  stronger  with  a  ratio  somewhere 
more  favorable  to  gold  than  with  the  old  ratio.  (On 
this  point  see  pp.  102-5.)  The  maintenance  of  any 
ratio  in  the  coinage  is  a  question  of  the  proportion 
between  the  forces,  natural  or  commercial,  making  for 
divergence  and  the  force  exerted  by  the  bimetallic  prin- 
ciple in  the  way  of  restraining  divergence  and  holding 
the  metals  together.  If,  indeed,  the  conditions  of 
production  have  changed  in  the  direction  of  giving 
gold  a  higher  value  in  terms  of  silver  than  formerly, 
the  "  factor  of  safety  "  will  be  smaller  with  the  old 
ratio  than  it  would  with  a  new  ratio  somewhat  more 
favorable  to  gold — say,  18  or  20  :  I.  Yet  notwith- 
standing this,  the  "  factor  of  safety"  might  still  be 
sufficient  to  hold  the  bridge  *  in  place  and  enable  it  to 
do  its  beneficent  work  at  the  old  ratio.  These,  as  I 
said,  are  questions  to  be  dealt  with  when  the  nations, 
or  a  sufficient  number  of  them,  have  made  up  their 
minds  and  have  agreed  together  to  re-establish  bi- 

*  See  page  142. 


2 1 4  BIME  TA  LLISM. 

metallism.     Any  serious  discussion  of  the  ratio  prior 
to  that  time  is  playing  into  the  hands  of  the  enemy. 

To  resume  our  story  of  the  progress  of  the  Great 
Debate.  The  reports  of  the  Gold  and  Silver  Commission, 
made  in  1887  and  1888,  could  not  fail  to  produce  a  pro- 
found impression  upon  the  public  mind  of  England 
and  of  the  Continent.  The  weight  of  testimony — 
even  that  given  by  avowed  gold  monometallists,  like 
Sir  Robert  Giffen  and  Lord  Farrer — had  tended  to 
lift  bimetallism  in  the  public  view  as  a  system  economi- 
cally sound  and  thoroughly  practicable  under  the 
normal  operation  of  individual  self-interest,  subject 
only,  at  the  worst,  to  diplomatic  and  political  difficul- 
ties and  complications;  whil»  the  unanimous  admis- 
sion, on  the  part  of  the  Commission,  as  to  the  practi- 
cal efficiency  of  the  system  under  the  test  of  actual 
working  from  1803  to  1873  largely  removed,  even  in 
the  highly  conservative  public  mind  of  England,  those 
sentiments  of  contempt  and  distrust  which,  down  to 
this  time,  had  withstood  the  progress  of  bimetallist 
views,  in  spite  of  arguments  alike  from  reason  and 
from  experience.  The  proscription  of  bimetallism 
ceased.  With  the  authority  of  the  universities  and 
with  the  approval  of  a  Commission  like  that  over 
which  Lord  Herschell  presided,  it  could  no  longer  be 
"  bad  form"  to  be  a  bimetallist.*  The  British  Bi- 
metallic League  was  formed ;  and  a  thorough  canvass 

*  In  a  recent  speech,  Mr.  Balfour  said  :  "I  recollect  the  day 
when,  to  announce  yourself  as  a  bimetallist — though  almost  every 
economist  of  repute  was  at  that  very  moment  a  declared  bimetal- 
lism— was,  nevertheless,  to  write  yourself  down,  in  the  opinion  of 
those  I  am  speaking  of,  as  a  faddist  of  the  most  dangerous  order," 


THE   GREAT  DEBATE.  21$ 

of  the  Kingdom  was  undertaken.  In  August,  1893, 
no  small  sensation  was  created  by  the  appearance, 
upon  the  public  platform,  of  Mr.  Arthur  J.  Balfour, 
the  Conservative  leader  in  the  House,  now  First  Lord 
of  the  Treasury,  in  the  role  of  an  earnest  advocate 
of  bimetallism.  Mr.  Balfour  had  been  one  of  the  bi- 
metallists  of  the  Herschell  Commission,  though  not, 
until  the  occasion  stated,  supposed  to  be  a  positive 
and  active  advocate  of  the  adoption  of  that  system  by 
his  own  country.  Mr.  Leonard  Courtney  had  been 
one  of  the  strongest  of  the  monometallists  of  the 
Commission.  In  the  Nineteenth  Century  Magazine  of 
April,  1893,  Mr.  Courtney  announced  his  adherence 
to  the  cause  of  bimetallism.*  Mr.  Henry  Chaplin, 
long  the  leader  of  the  agricultural  interest  in  Parlia- 
ment, and  a  member  of  the  present  and  of  the  last 
Conservative  administration,  also  joined  in  the  move- 
ment. The  great  Baring  failure,  throwing  a  flood  of 
light  upon  the  effects  of  demonetization  in  the  coun- 
tries which  were  largely  debtors  to  England,  made 
converts  even  in  the  city  of  London;  and  Mr. 
Lidderdale,  who  had  been  Governor  of  the  Bank 
during  that  tremendous  crisis,  and  whose  masterly 
conduct  saved  England  and  the  world  from  a  terrific 
catastrophe,  joined  the  ranks  of  the  bimetallists. 
The  strength  of  that  party  in  the  House  of  Commons 

*  "  Five  years  ago  I  joined  with  my  friends  in  deprecating 
any  attempt  to  establish  an  international  agreement  for  the 
free  coinage  of  both  gold  and  silver  as  standard  money.  I  have 
advanced,  with  further  experience  and  reflection,  to  the  belief 
that  such  agreement  is  to  be  desired,  and  that  it  could  be  accom- 
plished with  the  minimum  of  change  and  with  great  advantage 
to  the  empire  and  the.  world,  on  the  Conditions  I  have  suggested," 


2l6  BIMETALLISM. 

steadily  increased,  with  successive  general  or  "bye  " 
elections. 

I  have  spoken  of  the  effects  of  demonetization  upon 
countries  debtor  to  England.  The  monometallists 
had  long  been  accustomed  to  urge,  as  an  argument 
for  their  case,  the  heavy  premiums  which  the  progress 
of  demonetization  enabled  England  to  collect  from  the 
peoples  to  which  her  surplus  capital  had  been  loaned. 
Thus,  China,  in  repaying  her  gold  loan  of  1885,  paid 
about  double  the  amount  she  had  received,  inasmuch 
as  the  exchange  for  the  loan  was  paid  at  33.  gd.  per 
tael,  whereas  the  quotation  at  the  time  of  repayment 
was  is.  n£d.*  In  his  speech  in  the  House  of  Com- 
mons, February  28,  1893,  Mr.  Gladstone  offered  this 
as  a  leading  argument  against  the  restoration  of 
bimetallism.  But  England  was  to  learn  that  there  is 
a  point  beyond  which  selfish  aggrandizement  cannot 
be  pressed  without  disaster;  that  there  is  such  a  thing 
as  carrying  the  oppression  of  debtors  so  far  as  to 
bankrupt  them,  with  consequences  injurious  to  the 
creditor  himself;  that  economic  retributions  do  take 
place  even  in  this  world  of  imperfect  justice.  The 
extensive  failures  in  Argentina,  Australia, f  and  other 
countries  to  which  England  had  loaned  enormous 
amounts  of  capital,  began  after  1890  heavily  to  offset 
the  advantages  to  be  derived  from  the  appreciation  of 
gold.  Against  the  profits  of  squeezing  the  debtor  had 
to  be  weighed  the  possible  losses  to  be  sustained  from 
his  bankruptcy ;  and  minds  that  were  not  to  be  con- 

*  Foxwell,  Address  before  the  National  Liberal  Club,  p.  35. 
f  Sir  Robert  Giffen  had   in  1888  predicted  serious   trouble    in 
these  countries  frprrj  the  appreciation  of  gold. 


THE   GREAT  DEBATE.  2I/ 

vinced  by  arguments  concerning  the  solidarity  of 
human  interests,  were  enlightened  by  experience  of 
the  natural  effects  of  a  selfish  and  grasping  policy. 
Of  this  period  of  English  finance  Prof.  Foxwell  says: 

"  The  gold  creditor  has  sustained  enormous  losses  by  the 
various  repudiations,  reconstructions,  moratoriums,  forced 
reductions  of  interest,  to  which  the  increased  pressure  of  debt 
has  given  rise  ;  and  the  smooth  terms  applied  to  the  breaches 
of  contract  indicate  that  they  are  received  with  some  toler- 
ance, as  not  wholly  inequitable.  Even  so  stanch  a  supporter 
of  the  gold  standard  as  the  Pall  Mall  Gazette  states,  on  March 
5,  1895,  that  the  inviolable  sanctity  of  the  mortgagee  cannot  be 
maintained  where  everything  is  in  a  state  of  flux."  (Address 
before  the  National  Liberal  Club,  pp.  35,  36.) 


SILVER   COINAGE  IN  THE   UNITED   STATES. 

Meanwhile  the  United  States  had  continued  the 
mischievous  policy  of  coining  silver,  at  the  ratio  of  16 
to  i,  which  had  been  begun  under  the  Act  of  Feb- 
ruary 28,  1878;  while  the  agitation  of  the  subject 
throughout  the  country  became  more  and  more  in- 
tense. As  the  views  and  wishes  of  those  who  have 
not  failed  since  1876  to  press  upon  the  public  mind 
and  upon  the  attention  of  Congress  the  importance  of 
action  to  restore  silver  to  its  former  rank  as  a  money 
metal,  have  differed  very  widely,  it  seems  right  to  say 
a  few  words  in  characterization  of  the  three  classes  of 
persons  in  the  United  States  who  have  been  wont  to 
call  themselves  bimetallists.  We  have,  first,  the 
inhabitants  of  the  silver-producing  states.  These  citi- 
zens have  what  is  called  a  particular  interest,  as  distinct 
from  a  participation  in  the  general  interest.  The 


2 1 8  B IME  TA  LLISM. 

restoration  of  silver  to  the  position,  as  a  money  metal, 
which  it  occupied  down  to  1873  would,  at  any  time 
during  the  past  fifteen  years,  have  meant  to  these 
people  a  higher  price  for  the  products  of  their  com- 
munity or  section,  perhaps  of  their  individual  proper- 
ties. Their  interest  in  the  maintenance  of  silver  as  a 
money  metal  has  been  of  the  same  nature  as  the 
interest  of  Pennsylvanians  in  the  duties  on  pig  iron 
and  of  the  citizens  of  Ohio  and  Michigan  in  the  duties 
on  wool.  Silver  coinage  is  with  them  not  a  financial 
but  an  industrial  issue.  Although  the  silver-mining 
industry  of  the  country  is  not  large,  in  comparison  with 
scores  and  scores  of  others,  it  has  yet  been  able  to  exert 
a  high  degree  of  power  in  our  politics,  partly  because 
of  our  system  of  equal  representation  in  the  Senate, 
partly  because  of  the  eagerness  and  intensity  with 
which  the  object  has  been  pursued.  The  second  of 
the  three  classes  referred  to  consists  of  those  who, 
without  any  particular  interest  in  the  production  of 
silver,  are  yet,  in  their  general  economic  views,  in 
favor  of  superabundant  and  cheap  money.  Among 
the  leaders  of  this  element  have  been  found  the  very 
men  who,  between  1868  and  1876,  were  foremost  in 
advocating  the  greenback  heresy.  Beaten  on  the  issue 
of  greenback  inflation,  they  have  taken  up  the  issue 
of  silver  inflation.  They  have  adopted  the  cause  of 
silver,  not  because  silver  is  more  valuable  than  irre- 
deemable paper  (which  they  prefer),  but  because  it  is, 
and  more  especially  because  it  promises  still  further  to 
become,  cheaper  than  gold,  at  the  legal  ratio.  They 
are  for  depreciated  silver,  because,  in  their  view,  it  is 
the  next  best  thing  (by  which  they  mean  what  we. 


THE   GREAT  DEBATE.  21$ 

should  call  the  next  worst  thing)  to  greenbacks. 
Those  who  constitute  the  element  now  under  consid- 
eration are  not  true  bimetallists.  What  they  really 
want  is  silver  inflation. 

The  third  element  of  the  silver  party  in  the  United 
States  is  one  that  has  little  in  common  with  those 
which  have  been  described,  except  by  the  accident  of 
the  situation.  It  comprises  the  convinced  bimetallists 
of  the  country;  men  who  believe,  with  Alexander 
Hamilton  and  the  founders  of  the  republic,  that  it  is 
best  to  base  the  circulation  upon  both  the  precious 
metals.*  These  men  are  bimetallists  because  they 
believe  that  that  system  will  at  once  avoid  the  evils  of 
a  restricted  money-supply,  secure  an  approximate  par- 
of-exchange  between  gold  countries  and  silver  coun- 
tries, and  promote  stability  of  value  in  the  money  of 
the  commercial  world.  They  are  not  inflationists, 
although,  in  accordance  with  their  general  views  re- 
garding the  importance  of  the  status  and  the  evils  of 
disturbing  the  existing  structure  of  industrial  society, 
they  strongly  deprecate  contraction. 

I  would  not  wish  to  be  understood  as  refusing  to 
regard  as  real  bimetallists  many  persons  who,  in  the 
situation  existing,  are  in  favor  of  the  free  coinage  of 

*  "  Upon  the  whole,  it  seems  to  be  most  advisable  not  to  attach 
the  unit  exclusively  to  either  of  the  metals;  because  this  cannot 
be  done  effectually  without  destroying  the  office  and  character  of 
one  of  them  as  money,  and  reducing  it  to  the  situation  of  a  mere 
merchandise.  .  .  .  To  annul  the  use  of  either  of  the  metals  as 
money  is  to  abridge  the  quantity  of  circulating  medium,  and  is 
liable  to  all  the  objections  which  arise  from  a  comparison  of  the 
benefits  of  a  full  with  the  evils  of  a  scanty  circulation"  Hamilton; 
Report  on  the  Mint, 


2  2O  BIME  TA  LLISM. 

silver.  The  test  of  the  true  bimetallist  is  simply  this: 
is  it  his  object  to  secure  an  absolute  or  approximate 
par-of-exchange  between  the  two  metals,  and  to  pro- 
mote the  fullest  use  of  both,  as  money,  which  may  be 
consistent  with  the  working  of  the  laws  of  trade  ?  If 
this  is  his  bona  fide  wish  and  purpose,  any  man  is 
entitled  to  be  considered  a  bimetallist,  even  though 
he  may  propose  a  mistaken  policy  in  any  given  place 
and  time.  The  error  of  those  free-coinage  men  who 
are  also  sincerely  in  favor  of  the  larger  bimetallism,  is 
in  failing  to  recognize  (i)  that  the  time  has  passed 
when  even  France,  herself,  could  maintain  the  func- 
tion she  performed  from  1803  to  1873,  so  greatly  have 
the  stocks  of  the  precious  metals  been  increased ;  so 
vast  is  now  the  mass  of  securities  immediately  market- 
able; so  much  more  rapid  is  the  communication  of 
news  and  the  transportation  of  specie;  so  potent  has 
been  the  influence  of  Germany,  through  its  passing 
over  from  the  silver  to  the  gold  states:  so  much  have 
trade  and  production  developed  with  the  improvement 
of  arts  and  the  increase  of  population.  (2)  That  the 
people  of  the  United  States  normally  use  vastly  less 
metal  money  than  the  French  now  do,  or  than  the 
French  did  in  the  early  time;  and,  by  consequence, 
this  country  is  not  and  has  never  been  in  a  position  to 
exert  an  equal  effect  upon  the  market  for  the  money 
metals. 

I  have  habitually  spoken  of  "at  least  an  approxi- 
mate ' '  par-of-exchange  betweeen  gold  and  silver  as 
established  by  the  bimetallic  system.  In  speaking, 
just  now,  of  an  "absolute  "  par-of-exchange,  I  have 
in  mind?  not  a  theoretically  perfect  standard,  but  one 


THE    GREAT  DEBATE.  221 

which  is  exact  and  indefeasible  within  the  range  of 
economic  choice  and  preference.  Thus,  while  there  are 
no  two  objects  in  nature  exactly  alike,  there  are  many 
classes  of  objects  where  the  individuals  are  so  nearly 
alike  that  no  economic  preference  exists  between 
them;  possibly,  so  nearly  alike  that  our  untrained  and 
unassisted  senses  do  not  discern  the  difference.  In 
such  cases,  economically  speaking,  the  parity  is  abso- 
lute, in  spite  of  non-economic  differences  which  might 
be  discerned  by  the  expert  or  which  might  be  of  much 
interest  and  importance  to  the  man  of  science.  In  the 
same  way,  while  it  is  true  that  gold  and  silver,  each 
having  its  own  separate  sources  of  supply  and  its  own 
separate  causes  of  demand,  can  never  bear  a  theoreti- 
cally exact  value-relation  to  each  other,  it  is  entirely 
conceivable  that  the  force  exerted  by  the  bimetallic 
system  in  restraining  tendencies  to  divergence,  from 
natural  and  commercial  causes,  between  the  two 
metals,  might  become  great  enough  to  prevent  all 
fluctuations  of  value  inside  the  limits  of  economic 
Preference.  There  never  were  two  horses  which  took 
a  single  step  absolutely  together;  and  yet,  with  a 
stout  carriage,  a  sound  harness,  and  a  strong  hand  on 
the  reins,  millions  of  horses  are  every  day  driven  in 
pairs  with  a  practically  good  result,  the  hand  of  the 
driver,  the  harness,  and  the  pole  of  the  carriage  taking 
up  and  disposing  of  all  irregularities  in  the  motions  of 
the  two  animals.  We  have  seen  (pages  125-130)  how 
great  was  the  power  of  one  State  in  restraining  the 
tendencies  to  divergence  between  the  precious  metals. 
Prof.  Lexis  has  admitted  that  a  bimetallic  league 
might  be  found  sufficiently  strong  to  destroy  all 


222  B1ME  TA  LLISM. 

preference  for  either  metal  outside  "the  bimetallic 
basin."  This  would  not  mean  that  the  value  of  gold 
and  silver  would  remain  absolutely  at  the  ratio  fixed 
by  the  bimetallic  agreement;  but  that  the  range  of 
divergence  would  be  always  within  the  cost  of  trans- 
porting metals  from  monometallist  markets  to  bi- 
metallic mints.  If  this  were  so,  it  would,  for  all  prac- 
tical commercial  purposes,  be  the  same  thing  as  if 
there  were  no  divergence  whatever.  A  preference  for 
either  metal,  in  a  monometallist  market,  which  fell 
short  of  the  cost  of  transporting  the  other,  the  cheapen- 
ing metal,  to  a  bimetallic  mint  would,  for  all  purposes 
of  economic  reasoning,  be  the  same  as  actual  indiffer- 
ence. To  this  case  would  apply  Mr.  J.  S.  Mill's 
remark  made  with  reference  to  another  subject: 
"  Small  means  do  not  merely  produce  small  effects; 
they  produce  no  effect  at  all." 

To  return  to  the  consideration  of  the  several  classes 
of  persons  interested  in  the  silver  problem  of  the 
United  States.  Popular  misunderstanding  of  the  re- 
spective positions  of  these  classes  has  been  greatly  in- 
creased by  the  bitterness  and  unfairness*  of  the  Eastern 
press.  Many  papers,  in  other  things  respectable,  have 

*  That  this  treatment  of  bimetallists  is  not  wholly  confined  to 
the  United  States  may  be  gathered  from  the  following  remark  of 
Rt.  Hon.  Henry  Chaplin,  of  the  present  British  Cabinet,  made  in 
an  address  before  the  Scottish  Chamber  of  Agriculture,  in  May 
of  1894.  "  I  often  think  that  it  is  very  fortunate  for  us  that  we 
do  not  happen  to  be  living  still  in  the  days  of  the  Dark  Ages,  for 
I  am  quite  confident,  if  we  were,  that  the  conveners  of  this  meet- 
ing, probably  your  chairman  and  most  certainly  the  member 
from  Sleaford,  would  have  been  burned  at  the  stake,  if  that  were 
possible,  by  our  monometallic  opponents,  before  I  could  escape 
from  Edinburgh." 


THE   GREAT  DEBATE.  22$ 

never  ceased  to  denounce  those  who  favored  the  re- 
habilitation of  silver,  no  matter  to  which  of  the  fore- 
going classes  they  belonged,  as  cranks,  fanatics,  and 
lunatics.  Journals,  ordinarily  decent  and  dignified, 
have  never  given  a  single  statement,  as  to  what  bimet- 
allism is  and  what  the  bimetallists  desire,  from  which 
a  careful  reader  could  form  the  faintest  conception  of 
that  system.  Misrepresentations  and  downright  cari- 
cature of  bimetallist  principles,  and  insult  and  con- 
tumely towards  the  persons  professing  them,  have 
formed  the  systematic  policy  of  not  a  few. 

In  1889  and  1890  the  agitation  for  the  free  coinage 
of  silver  had  risen  to  such  a  height  as  to  threaten  the 
inauguration  of  a  system  which  would,  in  the  opinion 
of  all  conservative  men,  not  only  monometallists  but 
bimetallists,  have  speedily  brought  the  United  States 
to  silver  monometallism,  having  a  par-of-exchange  / 
with  the  East  and  with  the  states  of  South  America,  ( 
but  with  a  large  and  fluctuating  premium  upon  gold.  \ 
More  than  once  this  result  appears  to  have  been  averted  * 
only  by  the  aggressive  courage  and  stubborn  persist- 
ency of  a  few  members  of  the  House  of  Representa- 
tives. The  Senate,  at  this  time,  owing  largely  to  the 
system  of  equal  representation  of  States,  could  have 
furnished  no  barrier  to  such  a  movement;  and  there 
was  great  doubt  whether  President  Harrison  would 
interpose  the  Executive  veto.  Under  these  circum- 
stances, with  the  plea  that  it  was  necessary  to  concede 
something  in  order  to  avert  free  coinage,  was  passed 
the  so-called  Sherman  bill,  of  1890,  which  provided 
for  the  purchase  by  the  Treasury  of  4,500,000  ounces 
of  silver  per  month.  This  measure  was  of  a  thor- 


224  BIMETALLISM. 

oughly  mischievous  character  and  effect.  That  it 
was  necessary  to  make  this  concession  to  the  free- 
coinage  party  I,  for  one,  do  not  believe.  I  am  so 
little  of  a  doctrinaire  that  I  should  hesitate  to  say 
that,  in  all  matters  political,  flat  and  contemptuous 
resistance  to  unreasonable  demands  and  evil  measures 
is  always  a  safe  policy.  But  my  study  of  financial 
history  creates  an  increasing  conviction  that  the  only 
good  policy  in  dealing  with  financial  crazes  is  to  fight 
them,  without  asking  or  giving  quarter.  The  men  of 
1890,  to  whom  the  people  had  entrusted  their  powers 
of  legislation,  did  not  deal  with  the  matter  in  this 
spirit.  Doubtless  politics,  in  the  lowest  sense  of  the 
word,  entered  not  a  little  to  affect  their  temper;  and 
the  coming  presidential  election  cast  its  baleful  shadow 
before. 

THE   CONFERENCE   OF    1892. 

In  1892  the  United  States  again  invited  the  powers 
of  Europe  to  meet  in  conference.  France  politely 
declined  to  make  Paris  the  seat  of  the  Conference ;  and 
the  English  Government  was  quite  confident  that  the 
proposed  objects  would  not  be  favored  by  holding  it 
in  London.  Brussels  was  accordingly  selected.  Un- 
fortunately, the  taint  of  partisan  politics  attached  to 
the  scheme  from  the  beginning.  I  entertain  no  doubt 
that  the  Conference  was  hit  upon  by  certain  leaders, 
both  in  the-  Republican  and  in  the  Democratic  party, 
as  a  means  of  taking  the  silver  question  out  of  the 
presidential  campaign  of  that  year.  It  would  then  be 
practicable  to  suppress  the  agitation  for  the  free  coin- 
age of  silver,  during  that  critical  period,  by  light  and 


THE   GREAT  DEBATE.  22$ 

easy  reference  to  the  fact  that  a  great  gathering  of  the 
nations  was  to  take  place,  to  consider  the  subject, 
carrying  the  intimation  that  at  last  "justice  would  be 
done  to  silver."  So  far  was  this  game  of  politics 
carried  that  the  negotiations  for  holding  the  Conference 
were  protracted  to  a  point  which  deprived  the  bimetal- 
lists  of  almost  the  only  hope  that  could  have  been 
entertained  of  a  fortunate  issue.  At  the  time  when 
the  law  authorizing  the  Conference  was  passed,  the 
Conservatives  were  in  power  in  England.  Lord  Salis- 
bury was  known  to  entertain  the  same  benevolence 
towards  bimetallism  which  had  characterized  Lord 
Beaconsfield,  and  which,  indeed,  a  British  Minister  of 
Foreign  Affairs  is  very  likely  to  feel.  Mr.  Goschen, 
the  Chancellor  of  the  Exchequer,  was  also  known  as 
being  at  least  a  sympathizer  with  the  efforts  of  the 
bimetallists  to  restore  the  broken  par-of-exchange, 
while  the  Cabinet  contained,  besides  other  persons 
well  affected,  two  champions  of  out-and-out  bimetal- 
lism, Mr.  Balfour  and  Mr.  Chaplin.  Had  the  British 
commissioners  to  the  Brussels  Conference  been  ap- 
pointed by  the  Salisbury  ministry,  it  is  certain  that  a 
majority  of  the  members,  even  if  instructed  not  to 
compromise  the  English  standard,  would  have  been 
men  who  desired  a  successful  result;  and  they  would 
probably  have  been  authorized  to  make  some  very 
considerable  concessions  on  the  part  of  their  country, 
all,  indeed,  that  could  be  made,  saving  the  gold 
standard  of  the  British  Islands.  Owing,  however,  to 
the.  unnecessary  delay  which  the  United  States  allowed 
to  take  place  for  political  effect  at  home,  the  matter 
was  not  brought  to  an  issue  until  the  Conservative 


226  BIME  TA  LL1SM. 

party  had  been  defeated  at  the  polls,  and  Lord  Salis- 
bury and  his  colleagues  were  about  to  yield  office  to 
Mr.  Gladstone  and  the  victorious  Liberals.  The 
selection  of  delegates  thus  fell  upon  a  ministry  whose 
chief  was  a  gold  monometallist  of  the  severest  type, 
who  deemed  it  not  improper  to  urge  upon  Parliament, 
as  an  objection  to  international  bimetallism,  the  ad- 
vantage which  England,  as  the  great  creditor  country 
of  the  world,  derived  from  the  appreciation  of  gold ; 
while  the  chancellorship  of  the  Exchequer  devolved 
upon  Sir  William  Harcourt,  than  whom,  probably, 
no  educated  man  in  the  Kingdom  was  less  capable  of 
treating  the  question  of  international  bimetallism  in 
the  spirit  of  liberality.  The  result  was  that  England 
appeared  at  the  Conference  in  Brussels,  on  the  22d  of 
November,  1892,  with  a  delegation  opposed  to  the 
professed  objects  of  the  gathering;  though  bimetallism 
was  well  represented  by  Sir  William  Houldsworth, 
while  Mr.  Alfred  de  Rothschild  exhibited  a  disposition 
to  favor  the  work  of  the  Conference,  so  far  as  was 
compatible  with  the  English  position.  British  India 
was  represented  by  General  Strachey  and  Sir  Guilford 
Molesworth,  the  latter  a  pronounced  bimetallist.  The 
subjoined  declaration  of  the  position  of  England  was 
offered  by  Sir  Rivers  Wilson: 

"  I  desire  to  explain  to  the  Conference  the  attitude  of  Her 
Majesty's  Government  upon  the  monetary  question.  The  in- 
vitation of  the  United  States  in  its  original  form  contemplated 
the  meeting  of  a  Conference  to  examine  the  possibility  of 
establishing,  by  international  agreement,  a  fixed  relation  be- 
tween the  values  of  the  two  precious  metals.  Her  Majesty's 
Government  did  not  find  it  possible  to  accept  an  invitation 
conveyed  in  terms  which  might  give  rise  to  a  misunderstand- 


THE   GREAT  DEBATE.  22? 

ing  by  implying  that  the  Government  had  some  doubt  as  to 
the  maintenance  of  the  monetary  system  which  has  been  in 
force  in  Great  Britain  since  1816.  At  the  same  time,  the  com- 
mercial interests  of  Great  Britain,  as  well  as  those  of  India  and 
of  the  British  possessions  in  the  far  East,  where  silver  alone  is 
used,  did  not  allow  Her  Majesty's  Government  to  view  with 
indifference  the  drawbacks  resulting  from  the  fall,  and,  more 
especially,  from  the  fluctuation  in  the  value  of  silver.  Her 
Majesty's  Government  therefore  accepted  the  invitation  of  the 
United  States  in  its  modified  form  ;  that  is  to  say,  to  consider 
what  measures,  if  any,  could  be  adopted  for  the  purpose  of 
increasing  the  use  of  silver  as  currency."  (p.  112.) 

The  United  States  was  represented  by  the  American 
Minister  at  Brussels,  by  Senators  Allison  and  Jones, 
by  Mr.  McCreary  of  the  House  of  Represenatives,  by 
Mr.  Henry  W.  Cannon,  of  New  York,  and  by  President 
Andrews,  of  Brown  University.  Holland  appeared  by 
two  delegates  of  great  ability,  Mr.  Van  Den  Berg, 
President  of  the  Netherlands  Bank,  and  Mr.  Boisse- 
vain.  The  attitude  of  this  delegation,  worthy  of  the 
Classic  Land  of  Finance,  was  that  of  prompt  and 
courageous  acceptance.  The  chairman,  Mr.  Van  Den 
Berg,  said: 

"  Our  ideal  is  an  international  bimetallic  agreement.  Such  an 
agreement  we  fully  believe  to  be  possible  and  desirable,  both  from 
the  theoretical  and  also  from  the  practical  point  of  view  (p.  77).  .  . 
We  in  Holland  are  unanimous  in  the  belief  that,  should  an  inter- 
national bimetallic  agreement  admit  gold  and  silver  to  free  coin- 
age at  a  fixed  ratio,  the  union  between  the  two  metals  would 
be  re-established  and  would  be  maintained  on  a  fixed  basis,  as 
in  fact  it  was  maintained  during  nearly  three-quarters  of  a  cen- 
tury, in  spite  of  the  extreme  variations  in  the  production  of 
gold  and  silver,  respectively,  which  took  place  in  that  period. 
I  need  not  remind  you,  gentlemen,  that  from  1800  to  1820 
silver  yielded  75  per  cent,  and  gold  25  per  cent.,  only,  of 


228  BIMETALLISM. 

the  total  value  of  the  precious  metals  produced.  Gradu- 
ally the  production  of  gold  increased,  while  the  production  of 
silver  continually  diminished  relatively  to  the  production  of 
the  yellow  metal ;  until,  after  the  discovery  of  the  Californian 
and  Australian  mines,  the  two  metals  arrived  at  a  position 
exactly  the  reverse  of  that  which  I  have  just  mentioned,  for  it 
was  gold  that  now  yielded  75  per  cent,  of  the  world's  produc- 
tion, while  silver  sunk  to  25  per  cent.,  and  took  the  place 
which  gold  had  occupied  half  a  century  before.  Well,  not- 
withstanding this  complete  inversion  of  the  respective  pro- 
duction of  the  two  metals,  the  ratio  between  gold  and  silver  re- 
mained nearly  fixed  and  steady,  and  I  believe  that  that  ratio 
would  have  been  maintained  permanently  if  the  use  of  silver 
had  not  been  proscribed  by  legislative  enactments.  It  must  be 
admitted  that  the  increase  in  the  production  of  silver,  of  which 
we  hear  so  much,  has  only  a  very  slight  importance  in  compar- 
ison with  the  development  in  the  production  of  gold  toward 
the  middle  of  the  century  which  is  now  approaching  its  close." 
(P-  124.) 

Belgium,  the  country  in  which  the  Conference  was 
held,  furnished  the  presiding  officer,  M.  Montefiore 
Levi  whose  remarks  concerning  the  importance  of  a 
par-of-exchange  between  gold  countries  and  silver 
countries,  I  have  already  quoted  (p.  145-6).  Among 
the  other  delegates  was  M.  Allard,  a  bimetallist  writer 
of  high  repute.  Many  of  the  names  occurring  in  the 
proceedings  of  the  Conference  are  familiar  to  readers 
of  the  proces-verbaux  of  the  Conferences  of  1878  and 
1 88 1,  while  others  of  the  notable  names  of  the  earlier 
period  are  missing.  The  attitude  of  England  in  the 
Conference  at  Brussels  was  hardly  more  unfavorable 
to  any  practical  result  than  was  that  of  France.  Ever 
since  the  Conference  of  1881,  France  had  assumed  the 
position,  not  formally  but  virtually,  of  having  done 


THE   GREAT  DEBATE.  22g 

her  share  in  the  matter,  and  of  being  now  disposed  to 
await  the  pleasure  of  the  European  states.  For  years 
after  the  great  discussion  began  in  1875  or  1876, 
France  had  been  charged  with  having  a  particular 
and  selfish  interest  in  looking  to  the  rehabilitation  of 
silver.  Even  the  courtesies  of  Conference  did  not 
suppress  the  intimation  that  other  states  werq  very 
friendly  and  benevolent  to  take  any  interest,  at  all, 
in  the  subject.  Of  this  France  had,  naturally  enough, 
become  tired.  She  had  put  her  finances  into  the 
best  condition  of  any  country  in  Europe;  she  had, 
with  a  rapidity  which  has  been  the  marvel  of  the 
generation,  effaced  the  marks  of  war  from  her  cities 
and  her  fields;  and  had  filled  her  purse,  through  a 
union  of  industry  and  frugality  which  cannot  suffi- 
ciently be  admired.  Occupying,  thus,  a  position  of 
advantage,  she  did  not  propose  to  have  herself  regarded 
as  a  suppliant,  or  in  fact  as  having  any  other  than  a 
general  interest  in  the  subject. 

Germany  appeared  at  Brussels  by  a  delegation.  The 
following  is  the  statement  of  its  position  by  Count 
Alvensleben:  "  Germany  being  satisfied  with  its  mone- 
tary system  has  no  intention  of  modifying  its  basis. 
The  Imperial  Government  does  not,  however,  fail  to 
recognize  that  the  continual  oscillation  and  the  con- 
siderable fall  of  silver  are  much  to  be  regretted  from 
an  economic  point  of  view,  and  that  it  would  be 
advantageous  to  the  economic  interests  of  the  Empire 
if  these  evils  could  be  remedied  in  a  lasting  manner." 

The  Conference  was,  as  a  matter  of  course,  with- 
out result.  There  is  reason  to  suppose  that  some  of 
the  powers  represented  had  almost  a  "feeling  of  griev- 


230  BIMETALLISM. 

ance  at  being  put  to  the  trouble  and  expense  of  accept- 
ing an  invitation  which  they  could  not,  with  due  regard 
to  international  comity,  decline.  From  the  first,  it 
was  evident  that  nothing  like  a  positive  result  in  the 
direction  of  international  bimetallism  was  to  be  ex- 
pected. Several  plans,  some  of  them  framed  with 
much  ingenuity,  were  proposed  by  individual  mem- 
bers, looking  to  an  increased  use  of  silver.  But, 
inasmuch  as  the  delegates  of  the  United  States,  the 
nation  which  had  called  the  Conference,  were  not  dis- 
posed to  regard  anything  short  of  full  bimetallism  as 
satisfactory,  these  plans  were,  one  after  another, 
dropped  or  withdrawn;  and,  on  the  i/th  of  December, 
the  Conference,  in  the  language  of  the  resolution, 
"  suspended  its  labors  and  decided,  should  the  govern- 
ments approve,  to  meet  again  on  the  3Oth  of  May, 
1893,"  Owing  to  the  general  conviction  that  nothing 
could  come  from  the  reassembling  of  the  Conference, 
the  matter  was  allowed  to  lapse;  and  this  effort  to 
bring  about  a  general  agreement  of  the  nations  was, 
like  those  of  which  we  have  already  spoken,  without 
result.  What  the  future  may  bring  forth,  no  man  is 
wise  enough  to  predict ;  but  it  appears  to  me,  as  it  has 
for  a  long  time  appeared,  that,  should  international 
bimetallism  ever  be  established,  it  will  be  through 
diplomatic  negotiations  quietly  conducted,  without 
speech-making  or  ceremony,  between  the  four  nations, 
France,  England,  Germany,  and  the  United  States, 
any  three  of  which  can,  at  any  time,  bring  about  the 
result.  If  those  four  nations,  or  any  three  of  them, 
shall  ever  agree  to  act  together  in  this  matter,  the 
programme  thu's  formed  would  secure  the  immediate 


THE   GREA  7'  DEB  A  TE.  2$  I 

and  unquestioning  assent  of  a  sufficient  number  of  the 
less  important  states  to  carry  it  to  a  triumphant  issue. 
The  ineffective  conclusion  of  the  Brussels  Confer- 
ence was  hailed  with  much  jubilation  by  the  enemies  of 
bimetallism  in  every  land.  It  was  declared  that  at  last 
"the  silver  bubble  "  had  burst,  and  that  now  the 
world  could  have  peace  and  monometallism.  This 
impression  was  strengthened  when,  a  few  months  later, 
the  increasing  ill  effects  of  the  American  silver  pur- 
chases compelled  the  repeal  of  the  Sherman  Act,  and 
the  British  Government  closed  the  mints  of  India  to 
silver  * — measures  competent  to  produce  singly  a  very 
large  effect;  and  which,  coming  thus  together,  for  a 
time  broke  the  silver  market  down  as  never  before  and 
produced  by  far  the  lowest  price  of  that  metal  in  terms 
of  gold  ever  known  in  the  history  of  mankind. f  This, 
at  any  rate,  if  the  previously  announced  death  of 
bimetallism,  on  several  successive  occasions,  had 
proved  premature,  could  not  fail  to  be  the  last  of  that 
pernicious  heresy.  But  the  truth  does  not  die,  cannot 
be  killed.  The  immortal  verity  of  a  world's  mopey  as 
wide  as  the  world's  trade  has  reasserted  itself  with 

*Mr.  Balfour  speaks  of  the  Indian  currency  of  1895  as  "the 
strangest  product  of  monometallist  ingenuity  which  the  world 
has  ever  seen — a  currency  which  is  as  arbitrary  as  any  forced 
paper  currency  which  the  world  has  ever  heard  of,  and  which  is 
as  expensive  as  any  metallic  currency  that  the  world  has  ever 
faced,  and  which,  unhappily,  combines  in  itself  all  the  disadvan- 
tages of  every  currency  which  human  beings  have  ever  tried  to 
form." 

fin  January,  1895,  the  "index-number"  of  general  prices  was 
60  ;  the  gold  price  of  silver  was  45.1  ;  in  each  case,  as  compared 
wi^h  100  as  the  average  of  the  twenty-five  years  1853-77. 


232  BIME  TA  LLISM. 

more  than  its  pristine  vigor.  Within  the  briefest 
period  after  these  two  measures,  which  were  supposed 
to  be  alike  the  death  and  the  burial  of  bimetallism, 
we  see,  in  1894,  the  Royal  Commission  on  Depression 
in  Agriculture  appointed  in  England,  and  the  Silver 
Commission  appointed  in  Germany  to  investigate  the 
effects  of  the  demonetization  wrought  by  Germany 
herself,  twenty-two  years  before;  and,  only  a  few 
months  later,  we  witness  the  astonishing,  the  astound- 
ing phenomenon  of  the  German  Reichstag  declaring, 
by  a  vote  of  more  than  two  to  one,  in  favor  of  negotia- 
tions for  monetary  reform ;  the  imperial  Chancellery 
by  a  vote  of  ten  to  four  rejecting  the  proviso  that,  in 
the  course  of  such  negotiations,  the  single  gold  stand- 
ard should  not  be  compromised;  and  the  British 
House  of  Commons,  by  unanimous  vote,  adopting,  in 
February  of  1895,  the  resolution  "That  this  House 
regards  with  increasing  apprehension  the  constant 
fluctuations  and  the  growing  divergence  in  the  relative 
value  of  gold  and  silver;  and  heartily  concurs  in  the 
recenjt  expressions  of  opinions  on  the  part  of  the 
Government  of  France  and  the  Government  and  Par- 
liament of  Germany,  as  to  the  serious  evils  resulting 
therefrom.  It  therefore  urges  upon  Her  Majesty's 
Government  the  desirability  of  co-operating  with  other 
powers  in  an  International  Conference  for  the  pur- 
pose of  considering  what  measures  can  be  taken  to 
remove  or  mitigate  these  evils." 


CHAPTER   VIII. 

REVIEW    AND    SUMMARY. 

WE  have  passed  over  a  wide  field  of  monetary  his- 
tory.    A  brief  review  may  be  instructive. 

(1)  We  saw  that  the  precious  metals  in  the  earliest 
ages  of  mankind  were  essentially  non-economic,  both 
as  to  their  production  and  as  to  their  use.      Had  gold 
and  silver  been  mined  by  free  hired  labor,  and  had  the 
product   gone   into   circulation  as  money,   such  vast 
accumulations  could  not  have  taken  place,  in  the  then 
existing  state  of  the  arts,   of  industry,  and  of  com- 
merce.    It  was  only  because  the  mines  were  worked 
by  convicts,  by   slaves,  by  serfs,   or  by  prisoners  of 
war,  while  the   product  became  royal  or  sacerdotal 
treasure,  that  the  yield   could  be  carried  to   such  a 
height  and  maintained  there. 

(2)  We  saw  that  the  invasion  of  Persia  by  Alexander 
and    the    subsequent    progress    of    Roman    conquest 
brought  the  long-accumulating  store  of  the  precious 
metals  into  circulation  as  money.     The  higher  prices, 
thus  created,  operated  of  themselves  to  check  produc- 
tion, while  the  inefficiency  of  the  Roman  administra- 
tion of  mines  caused  a  further  decline.     When  to  this 
was  added  the  effects  of  the  barbarian  invasions,  felt 
first   and  with    the   greatest   severity  in  the  mining 

233 


234  BIMETALLISM.    . 

regions,  like  Thrace  and  Spain,  the  yield  of  the  pre- 
cious metals  fell  rapidly  off,  and  soon  almost  altogether 
ceased. 

(3)  We  saw  the  accumulated  mass  of  money,  which 
had    been    produced    under    conditions    wholly    non- 
economic,     left,    thus,    without    reinforcement,     and 
subject    to   continual    impairment  by  wear  and  tear 
and  accidental  loss,  waste  away,   through    centuries, 
like  a  vast  iceberg  drifting  into  southern  seas,  until, 
at  the  close  of  the  eighth  century,  it  is  estimated  that 
the  stock  was  scarcely  one  tenth  of  that  which  existed 
under  Augustus. 

(4)  We  saw  that  to  this  long  silver  famme — gold 
had  early  ceased  to  be  even   thought  of  as  money, 
except  through  the  trivial  coinage  of  the  Moors  in 
Spain  and  the  larger,  though  still  not  considerable, 
coinage    of    the    rulers  of    Byzantium — is  reasonably 
attributed  no  small  part  of  the  immobility,  depression, 
and  hopelessness  of  the  early  middle  ages. 

(5)  We  saw  that,   at  about   the  beginning  of  the 
tenth  century,  the  discovery  of  new  mines  of  silver  in 
Europe  and  the  revival  of  activity   in   some   of  the 
older  districts  furnished  a  supply  which,  at  the  least, 
repaired  the  waste  of  the  existing  stock,  and  perhaps 
caused  some  small  increase;  that  the  course  of  the 
earlier  crusades  brought   the    precious    metals    more 
freely  into   Europe;   while,   at  the  beginning  of  the 
thirteenth   century,   the   Frankish   occupation  of  the 
Eastern  Throne,    carrying  with  it  the  possession   of 
extensive  hoards  which  had  escaped  the  ravages  of 
time  and  the  control  of  perhaps  the  only  open  mines 
of  gold  in  the  world?  brought  the  latter  metal  into 


REVIEW  AND    SUMMARY.  235 

Italy  and  France  in  amounts  so  considerable  that,  at 
about  the  middle  of  that  century,  began  again  the 
coinage  of  gold,  after  a  disuse  extending  over  many 
hundreds  of  years. 

(6)  We    saw  that    from   the  gold  coinages  of  the 
thirteenth    and    fourteenth   centuries    arose   the    real 
bimetallic  problem.     With   the  scant  supply  at    the 
best  existing,  and  under  the  influence  of  wholly  vicious 
traditions  and  theories  regarding  the  precious  metals, 
the   several  nations  set  themselves,  by  every  device 
and  contrivance,  and  even  by  violence,  to  keep  and 
to  hold  the  largest  possible  amounts  of  gold  and  silver, 
without  regard  to  the  normal  distribution  of  the  money 
metals  through  the  agency  of  price.      Gold  and  silver 
being  esteemed  the  only  true  wealth,  the  prime  object 
in  production,  the  one  successful  result  of  trade,  their 
export  in  the  ordinary  course  of  commerce  was  deemed 
a  national  loss,  to  be  guarded  against  by  every  kind 
of  law  or  regulation,  enforced  by  penalties  the  most 
severe. 

(7)  We  saw  that,    under  the  domination  of  these 
ideas  and   motives,    the  nations  resorted   to   policies 
which  were  individualistic,  selfish,  and  mutually  antag- 
onistic, with  no  thought  of -a  general   interest,  with 
no  purpose  to  establish  a  world's  money  carrying  the 
largest  benefit  to  all,  but  wholly  framed  to  seize  and 
retain  the  largest  possible  share  of  the  common  stock. 
To  this  end,   ratios  between  gold   and  silver  in  the 
coinage  were  established,  which  were  changed  when- 
ever the  object  in  view  seemed  to  require  it. 

(8)  We  saw  that,  under  such  a  system,  one  metal 
or  the  other  was  continually  flowing  out  of  one  coun- 


236  BIMETALLISM. 

try,  into  another,  according  as  the  one  or  the  other 
bid  higher  for  it,  the  Jews  and  Lombards  developing 
an  almost  preternatural  acuteness  and  activity  in 
promoting  this  exchange  of  the  metals,  and  reaping  a 
rich  harvest  from  the  greed  and  fatuity  of  the  contest- 
ants for  the  scanty  supply  then  in  existence.  We 
saw  that  the  inadequacy  of  that  supply — the  stock  of 
both  metals  being  painfully  insufficient  for  the  wants 
of  trade — led  to  a  corruption  and  debasement  of  the 
coin  almost  inconceivable,  which  greatly  complicated 
the  problem  for  those  rulers  who  sought  to  keep  both 
metals  in  circulation  within  their  respective  countries, 
and  which  is  largely  responsible  for  the  traditional 
notion  that  gold  and  silver  cannot  be  kept  in  concur- 
rent circulation.  We  saw,  however,  that  the  rapidity 
and  completeness  with  which  the  metal  which  at  any 
time  and  in  any  place  was  undervalued  in  the  coinage 
was  drained  away,  has  been  enormously  exaggerated 
by  many  economic  writers,  especially  those  opposed  to 
bimetallism,  since  undoubted  facts,  testified  to  by  the 
highest  authorities,  show  that  this  movement  never 
began  as  early,  proceeded  as  rapidly,  or  continued  as 
long  as  it  has  been  customary  to  allege. 

(9)  We  saw  that  the  discovery  of  America  by 
Columbus  and  the  conquest  of  Mexico  and  Peru, 
produced  a  monetary  revolution.  Silver  poured  in 
vast  floods  from  the  newly  opened  mines,  causing  a 
tumultuous  rise  of  prices  in  Europe  and  extensive 
changes  in  the  ratio  between  the  two  metals — which 
moved,  from  about  1 1  of  silver  against  I  of  gold  to  1 5 
of  the  former  against  I  of  the  latter;  setting  in  motion 
economic  forces  of  the  highest  order  for  the  redistribu- 


REVIEW  AND    SUMMARY. 

tion  of  wealth  among  the  different  classes  of  society 
and  among  the  different  nations,  and  supplying  both 
the  means  and  the  impulse  for  an  extension  of  trade 
which  changed  the  face  of  the  industrial  world. 

(10)  We  saw  that,  by  about  1640  or  1660,  the  first 
effects  of  the  American  discoveries  had  been  realized. 
The  enormous  increase  of  the  money-supply  had  not 
only  wrought  a  social  and  industrial  revolution,  with 
consequences,  on  the  whole,  most  beneficent;  but 
had  brought  about  changes  in  government  policies 
and  in  the  popular  philosophy  regarding  trade  and 
money.  The  abundance  of  silver,  together  with  the 
advance  of  thought,  put  a  final  stop  to  that  corruption 
and  debasejnent  of  the  coin  whicfc  had  wrought  such 
disgrace  and  disaster  in  almost  every  land.  The  mints 
of  Europe  generally  became  honest;  while  a  better 
view  of  the  relations  of  money  to  national  welfare 
caused  a  relaxation  of  the  laws  prohibiting  or  regu- 
lating the  movement  of  the  precious  metals. 

(n)  We  saw  that  England,  in  1666,  adopted  a 
system  which,  with  whatever  defects,  contained  the 
promise  of  the  future,  silver  becoming  the  standard, 
with  gold  rated  to  it,  from  time  to  time,  by  proclama- 
tion. We  saw  that  the  operation  of  this  principle 
was  impeded  by  the  state  of  the  silver  coinage,  which, 
no  longer  by  the  frauds  of  government  but  by  the 
acts  of  sweaters  and  counterfeiters,  had  been  reduced 
to  a  frightful  and  intolerable  condition.  In  the  great 
recoinage  of  1696,  under  the  leadership  of  a  noble 
group  of  financiers  and  statesmen,  we  witnessed  the 
triumph  of  high  principles  and  sound  monetary  views; 
the  coinage  was  reformed,  and  the  bimetallic  system 


238  BIMETALLISM. 

at  last  inaugurated,  though  on  a  partial  and  unsatis- 
factory basis.  We  saw  that  gold  and  silver  did 
actually  remain  for  a  time  in  concurrent  circulation, 
although  the  overrating  of  the  guinea,  in  spite  of  the 
protests  of  Sir  Isaac  Newton,  continued  to  cause  the 
export  of  the  full-weighted  new  silver.  We  saw  that 
the  refusal  of  the  authorities  to  remedy  this  patent 
defect  led  to  the  gradual  exhaustion  of  the  silver  coin. 
We  saw  that,  from  the  state  of  suspension  which  con- 
tinued through  the  Napoleonic  wars,  England,  under 
the  leadership  of  the  second  Lord  Liverpool,  emerged 
as  a  monometallist  state,  with  gold  as  the  sole  money 
of  full  value,  silver  being  reduced  to  the  rank  of 
subsidiary  money. 

(12)  We  saw  the  United  States  in  1792,  inaugurate 
a  nominally  bimetallic  system,  upon  the  recommenda- 
tion of  Hamilton.     But  through  the  adoption  of  ratios 
between  gold  and  silver,   at  first  disparaging  to  the 
former,  whether  purposely  or  not,  and  then,  in  1834, 
with  an  unquestioned  intention,  unduly  favorable  to 
that  metal,  the  bimetallic  system  was  rendered  nuga- 
tory, though  without  any  legitimate  impeachment  of 
that  system,  on  either  theoretical  or  practical  grounds. 

(13)  We    saw    France,   in    1726,    establish  a   ratio 
between  gold  and  silver  in  the  coinage,  which,  being 
far  nearer  the  market  ratio    than  that  of    England, 
retained  both  metals  in  concurrent  circulation,  though 
with  a  constantly  diminishing  proportion  of  gold,  down 
to  the  time,  or  nearly  to  the  time,  when,   in    1785, 
Calonne,  in  connection  with  an  extensive  recoinage, 
introduced  the  famous  ratio  of  15^  to  I.     We  saw  that 
this  remained  the  legal  ratio  in  France  until  the  begin- 


REVIEW  AND    SUMMARY. 

ning  of  the  present  century,  though  its  influence  was 
greatly  impaired  and  for  a  time  altogether  neutralized 
by  the  issue  of  inconvertible  paper  money,  in  enormous 
volumes,  during  the  revolutionary  period.  We  saw 
that,  in  1803,  France,  having  drifted  out  of  the  state 
of  suspension,  did,  under  the  great  First  Consul,  re- 
establish the  free  (though  not  gratuitous)  coinage  of 
the  two  metals,  at  the  same  ratio.  We  saw  this 
system,  almost  from  the  first,  vehemently  assailed  by 
changes  in  the  production  and  use  of  gold  and  silver. 
Rapid  and  extensive  as  those  changes  were,  we  saw 
France  hold  to  her  system,  freely  coining  the  metal 
which,  under  the  conditions  existing,  tended  to  become 
less  valuable  than  at  the  ratio.  We  saw  that,  through 
these  immense  operations  on  the  market-for-bullion, 
France,  though  standing  alone  in  this  matter,  kept 
the  two  metals  close  to  the  legal  ratio,  the  deviations 
therefrom  being  for  the  most  if  not  for  all  the  time 
no  greater  than  were  to  be  explained  by  the  charges 
for  mintage  and  the  cost  of  transporting  specie  from 
the  London  and  Hamburg  markets.  Throughout  this 
period,  both  gold  and  silver  remained  money  in  France, 
though  the  proportion  of  the  latter  tended  continually 
to  increase  and  the  proportion  of  the  former  to  decline. 
We  saw  that,  before  the  stock  of  gold  in  France  had 
become  exhausted,  an  overwhelming  change  took 
place  in  the  conditions  of  the  production  of  the  two 
metals.  The  almost  simultaneous  discovery  of  the 
gold-fields  of  California  and  Australia — two  of  the 
three  greatest  "finds"  of  the  yellow  metal  in  the 
world's  history  occurring  within  three  years — and  the 
rapid  development  of  the  alluvial  deposits  of  the 


240  BIMETALLISM. 

Ural  Mountains  brought  upon  the  bimetallic  system 
of  France  a  shock  which,  it  was  generally  believed, 
could  not  possibly  be  withstood.  Country  after  coun- 
try demonetized  gold,  as  becoming  too  cheap  for  use 
as  money;  and  even  in  monometallic  England  propo- 
sitions for  abandoning  the  gold  standard  and  for 
founding  life-insurance  companies  upon  a  silver  basis 
were  freely  offered  and  discussed.  Yet  the  statesmen 
and  financiers  of  France  held  by  their  principles;  and 
her  moneyers  stood  at  their  posts,  coining  gold  in 
quantities  which  thrill  us  in  the  reading.  During 
eight  years,  from  1853  to  1860,  France  imported  3082 
million  francs  in  gold,  and  parted  with  1465  million 
francs  in  silver,  which  made  the  total  bullion  operation 
amount  to  4547  million  francs. 

Again,  and  this  time  in  an  overwhelming  degree, 
the  validity  of  the  bimetallic  system  was  established. 
The  maximum  momentary  effect  of  more  than  doub- 
ling the  world's  stock  of  gold  was  to  pull  the  metals 
apart  by  4f  per  cent. ;  while  the  permanent  effect  upon 
the  ratio  was  only  if  in  100.  During  all  this  period, 
the  variations  from  the  legal  ratio  in  France  seldom 
exceeded  the  cost  of  mintage  and  of  transporting 
specie  to  the  French  mint.  Thus  Europe  was  saved 
from  a  catastrophe  the  destructive  effects  of  which 
can  hardly  be  conceived;  and  the  bimetallic  system 
emerged  from  this  extraordinary  trial  unbroken  and 
triumphant.  We  have  seen  how  freely  the  validity  of 
this  cause  has  been  admitted  by  monometallists  like 
Chevalier,  of  France;  Lexis,  of  Germany;  Cairnes, 
Bagehot,  Jevons,  Giffen,  and  Farrer,  of  England.  We 
have  seen  how  full  has  been  the  recognition  and 


REVIEW  AND   SUMMARY.  2^1 

acknowledgment,  by  these  and  other  economists  hold- 
ing the  same  faith,  of  the  benefits  conferred  upon 
mankind  by  the  establishment  and  maintenance  of  an 
approximate  par-of-exchange  between  gold  and  silver, 
the  world  over,  through  the  action  of  France. 

We  saw  governors  of  the  Bank  of  France,  like 
Messrs.  Rouland  and  de  Normandie,  and  financiers 
like  the  Baron  Alphonse  de  Rothschild  and  M.  L6on 
Say,  confidently  maintaining  the  position  that,  in  ren- 
dering this  inestimable  service  to  mankind,  France 
considered  her  own  national  interests  and  promoted 
her  influence  among  the  nations. 

(14)  We    have    seen    how,    immediately   after   the 
Franco-German  war,  and,  it  is  reasonable  to  believe, 
largely  in  consequence  thereof,  Germany  passed  over 
from  the   silver-using  to  the   gold-using  states,    and 
thus  brought  upon  the  bimetallic  system  a  strain  which, 
in  the  weakened  and  depleted  state  of  France,  it  was 
not  thought  possible  for  her  to  endure.     The  mints  of 
France  and  of  her  colleagues  of  the  Latin  Union  were 
closed  to  silver;  and  thus,  for  the  first  time  since  the 
discovery  of  America,   silver  ceased  to  be  money  of 
full  power  and  free  coinage  in  the  States  of  Europe, 
generally. 

(15)  In  the  last  chapter  we  saw  intq  what  a  state 
of  agitation  and  turmoil  trade  and  production  were 
brought   by  the  demonetization  of  silver,  which  had 
been  thus  effected.     We  saw  the  rapid  succession  of 
legislative  committees,  commissions,  and  international 
conferences  called  to  contemplate  the  situation,  and 
to  discover  some  possible  means  of  escape  out  of  this 
disorder.      I  need  not  recapitulate  any  part  of  that 


BIME  TA  LLISM. 

great  debate.  I  shall  only  ask  attention  to  a  brief 
summary  of  the  principal  results  which  seem  to  have 
been  reached  in  the  discussion  of  the  effects  of  de- 
monetization. I  shall  attempt  no  forecast  of  the 
future. 

THE   BROKEN   PAR- OF- EXCHANGE. 

The  experiences  of  trade  and  production  since  the 
demonetization  of  silver  have,  in  the  view  of  bimetal- 
lists,  demonstrated  in  a  most  remarkable  degree  the 
thorough  validity  and  the  great  importance  of  that 
par-of-exchange  between  gold  and  silver  which  it  is 
the  prime  purpose  of  bimetallism  to  secure.  From 
the  very  first,  the  fluctuations  which  the  action  of 
Germany  in  1873  introduced  into  trade  were  of  the 
most  serious  character,  working  great  loss  to  inter- 
national commerce,  and  by  consequence  to  production. 
So  early  as  1879,  the  London  Economist  spoke  as 
follows : 

"  Uncertainty  must  attend  on  many,  if  not  on  most,  trading 
ventures  ;  but  when,  to  that  uncertainty,  an  additional  risk  of 
loss,  ranging  from  5  per  cent  to  10  per  cent  on  each  cargo,  is 
added,  it  is  no  wonder  that  the  most  cautious  find  themselves 
deceived  in  their  calculations,  and  merchant  after  merchant 
admits  that,  in.  lieu  of  profit,  he  has,  for  some  considerable 
time,  reaped  nothing  but  loss  from  trade  with  silver-using 
countries." 

The  disadvantages  which  the  first  financial  paper  of 
the  world  thus  depicted  in  1879  nave  since  become 
almost  universal.  International  trade  has  been  brought 
largely  into  the  condition  of  gambling ;  and  the  two 
great  divisions  of  the  world  have  been  involved  in  all 


REVIEW  AND   SUMMARY.  243 

the  embarrassments  which  beset  the  intercourse  of 
specie-paying  nations  with  those  having  inconvertible 
paper  money.  I  have  quoted  testimony  to  this  effect 
from  two  of  the  principal  commissions  which  have  in- 
vestigated the  state  of  trade  and  the  economic  experi- 
ence of  mankind  during  the  period  of  demonetization. 
I  have  also  liberally  introduced  quotations  to  the 
same  effect  from  the  writings  of  some  of  the  first  of 
living  economists,  many  of  them  gold  monometal- 
lists.  If  by  such  evidence  this  point  is  not  deemed 
to  be  established,  no  amount  and  character  of  testi- 
mony would  suffice. 

Some  of  the  most  interesting  and  remarkable  devel- 
opments of  the  period  following  the  demonetization 
of  silver  have  been  found  in  the  effects  produced  upon 
the  industry  and  trade  of  Oriental  nations.  I  have 
more  than  once  commented  upon  the  rapidity  and 
completeness  with  which  writers  of  the  a  priori  school 
in  economics  are  accustomed  to  assume  that  readjust- 
ment will  take  place  after  important  changes,  whether 
in  the  standard  of  value  or  in  the  conditions  of  pro- 
duction or  exchange.  I  have  referred  to  the  writings 
of  Professors  Cairnes  and  Cliffe  Leslie  to  show  that, 
after  the  discovery  of  America,  the  effects  of  the  new 
silver  extended  from  land  to  land,  only  with  long 
intervals;  and,  in  the  result,  were  irregularly  experi- 
enced by  different  nations,  by  different  classes  of 
economic  agents,  and  even  by  different  commodities. 
Even  after  the  gold  discoveries  at  the  middle  of  this 
century,  when,  it  might  be  supposed,  improvements 
in  trade,  in  transportation,  and  in  the  communication 
of  intelligence  would  have  secured  an  almost  instan- 


244  SI  ME  TA  LLISM. 

taneous  propagation  of  economic  forces,  Prof.  Cairnes 
has  abundantly  shown,  in  his  "Essays  on  the  Gold 
Question,"  that  the  influence  of  the  new  money  pro- 
ceeded, from  commodity  to  commodity,  from  class 
to  class,  and  from  country  to  country,  with  still  very 
considerable  intervals;  and  that  this  retardation  of 
the  forces  thus  operating  produced  large,  important, 
and  permanent  economic  effects.  That  I  may  not  be 
suspected  of  exaggeration,  I  quote  the  words  of  this 
most  authoritative  writer: 

"  Before  this  result  is  attained,  a  period  of  time,  longer  or 
shorter  according  to  the  amount  of  the  augmentation  and  the 
general  circumstances  of  commerce,  must  elapse.  In  the 
present  instance,  the  additions  which  are  being  made  to  the 
monetary  systems  of  the  world  are  upon  an  enormous  scale ; 
and  the  disturbances  effected  in  the  relation  of  prices  is  pro- 
portionally great.  Under  such  circumstances,  it  is  very  possi- 
ble that  the  inequalities  resulting  may  not  find  their  correction 
throughout  the  ivhole  period  of  progressive  depreciation :  a 
period  which,  even  with  our  present  facilities  of  production 
and  distribution,  may  easily  extend  over  some  thirty  or  forty 
years.  During  this  transitional  term,  the  action  of  the  new 
gold  on  prices  will  not  be  uniform,  but  partial.  Certain  classes 
of  commodities  and  services  will  be  affected  much  more  power- 
fully than  others.  Prices  generally  will  rise,  but  with  unequal 
steps."*  (p.  56.) 

*In  a  pamphlet  recently  published,  from  the  pen  of  the  Rt. 
Hon.  J.  Shaw  Lefevre,  the  two  following  propositions  are  main- 
tained :  (a)  If  the  fall  of  prices  had  been  mainly  due  to  the  ap- 
preciation of  gold,  that  fall  would  have  been  "equally  observed 
in  all  products,  subject,  of  course,  to  some  temporary  or  local 
exceptions  for  which  special  explanations  could  be  given."  (b)  If 
the  fall  of  rents  in  England  had  been  mainly  due  to  the  apprecia- 
tion of  gold,  it  would  have  taken  place  uniformly,  with  corre- 
sponding exceptions.  Inasmuch  as  the  fall  of  prices  has  been 


REVIEW  AND    SUMMARY.  245 

In  the  light  of  such  facts,  the  monometallists  were 
clearly  not  justified  in  assuming  that  the  readjustment 
of  international  values,  made  necessary  by  the  demon- 
etization of  silver  in  Europe,  would  be  early  or  easily 
effected.  But  their  error  becomes  altogether  inex- 
cusable when  we  consider  how  well  it  was  understood 
that  changes  of  any  nature  are  brought  about  with 
exceptional  difficulty  and  delay  among  the  peoples  of 
the  East.  The  force  of  custom,  tradition,  and  caste 
there  rises  to  its  maximum.  So  great  is  the  inertia 
of  the  Eastern  peoples  under  economic  shocks,  even 
the  most  tremendous,  that  at  times  it  seems  as  if  those 
shocks  were  not  felt  at  all. 

The  monometallist  assumption  I  have  referred  to 
was  to  the  effect  that,  as  silver  should  fall  in  compari- 
son with  gold,  silver  prices  at  the  East  would  corre- 
spondingly rise;  and  thus  the  trade-relations  of  the 

very  irregular  (far  beyond  what  would  be  embraced  in  the  saving 
clause)  as  respects  different  commodities,  and  as  rents  have  not 
fallen  with  any  approach  to  uniformity,  Mr.  Shaw  Lefevre  de- 
clares that  the  appreciation  of  gold  has  not  been  the  cause  of 
both  or  of  either  of  these  effects. 

On  the  contrary,  Profs.  Cairnes  and  Cliffe  Leslie  have  shown 
that  irregularity  in  the  rise  or  fall  of  prices  is  the  very  law  of 
currency  contraction  or  inflation.  As  to  rents,  it  would  be  easy 
to  show,  did  space  permit,  that,  in  addition  to  the  variations 
which  they  naturally  would,  equally  with  prices,  experience  as 
the  result  of  general  changes  in  the  currency,  they  have  an  ad- 
ditional reason  for  variation,  special  to  themselves.  Inasmuch 
as  economic  rent  is  not  taken  from  all  lands  in  proportion  to  the 
produce,  but  is  taken  only  from  the  better  lands,  and  from  these 
only  in  proportion  to  the  excess  of  value  in  the  produce  over  cost 
of  production,  changes  either  in  the  cost  of  production  or  in  the 
price  of  produce,  due  to  general  currency  changes,  would  affect 
rents  with  exceptional  irregularity. 


246  BIMETALLISM. 

two  halves  of  the  commercial  world  would  speedily  be 
readjusted,  to  suit  the  new  conditions.  In  making 
this  assumption,  the  writers  in  question  not  only 
excluded  the  remarkable  inertia  of  the  Eastern  peoples, 
but  they  failed  to  take  into  account  another  fact,  of 
very  great  importance  in  the  connection,  namely,  that 
silver  in  those  regions  is  not  merely  or  mainly  money, 
but  treasure;  it  is  largely  looked  upon  by  the  inhab- 
itants as  an  end  in  itself,  and  not  as  a  means  to  other 
ends.  It  is  estimated  by  the  highest  authorities  that 
of  the  entire  stock  in  India  only  about  one-third  is  in 
circulation,*  the  remaining  two-thirds  being  held  in 
hoards  by  the  natives,  peasants  and  princes  alike ;  or 
in  the  form  of  images,  articles  devoted  to  religious 
uses,  and  personal  ornaments.  The  actual  result,  as 
contrasted  with  the  result  anticipated,  has  been  that, 
while  silver  has  fallen  in  Europe  to  only  about  one- 
half  its  former  value  in  gold,  silver  prices  in  the  East 
have  remained  nearly  constant.  So  far  as  the  East 
Indian  laborer  applies  the  silver  he  may  obtain  for 
his  services  to  the  purchase  of  treasure  or  of  orna- 
ments, that  silver  is  just  as  good  to  him  as  it  was 
before  demonetization.  His  ideas  regarding  it  have 
been  fixed  by  untold  centuries  of  its  use  among  his 
people.  As  Sir  D.  Barbour  says:  "To  the  mind  of  the 
Indian  ryot,  the  rupee,  instead  of  the  pound  sterling, 

*  In.  Sir  R.  Giffen's  examination,  before  the  Commission  on 
Agriculture,  the  estimate  of  Mr.  F.  C.  Harrison  is  introduced,  that 
the  silver  in  India  amounts  to  510  crores  of  rupees,  of  which  166^ 
are  in  active  circulation  ;  considerably  less  than  50  hoarded  in 
the  form  of  rupees.  "  Roughly  speaking,  it  may  be  said  that  300 
crores  may  be  held  in  India  in  the  form  of  bullion,  obsolete  coin, 
and  ornaments,"  The  crore  is  ten  millions. 


REVIEW  AND    SUMMARY.  247 

is  the  one  fixed  point  in  an  ever-changing  world ;  and 
gold  rises  and  falls  in  price,  in  his  bazaar,  like  the 
most  vulgar  of  marketable  commodities."  So  far  as 
he  may  wish  to  use  his  wages  for  the  purchase  of  the 
services  of  others  in  his  own  community,  the  silver  is 
substantially  as  valuable  as  before.  The  same  is  true 
of  commodities  which  are  produced  to  be  consumed 
at  home.  As  Prof.  Lexis  says,  in  an  article  from 
which  I  shall  soon  have  occasion  to  quote  more  at 
length:  "Foreign  trade  touches  only  the  surface  of 
Indian  and  Chinese  national  economy;  and,  quantita- 
tively, it  forms  only  a  very  small  part  of  the  whole 
trade  in  those  enormous  States."  It  is  only  in  the 
production  of  goods  which  are  to  be  sold  largely  in 
competition  with  those  of  gold-using  countries  that 
even  a  movement  towards  readjustment  has  taken 
place.  The  consequence  of  all  this  has  been  an  in- 
crease of  exports  from  the  East  to  Europe,*  and  the 
rapid  development  throughout  Eastern  countries  of 
factories  and  work-shops  to  supply  demands  which 
were  formerly  met  by  importation  from  Europe. 
This  result  was  anticipated  by  Mr.  Bagehot  as  early 
as  1876.  That  sagacious  economist,  in  his  testimony 
before  the  Committee  on  the  Depreciation  of  Silver, 
made  the  following  remarks: 

"  I  should  say  the  effect  of  the  depreciation  of  silver  was  to 
cause  an  increased  export  of  goods  from  India  to  this  country, 
a  diminished  export  from  this  country  to  India."  (No.  1367.) 
"  I  think  the  increase  of  the  export  of  goods  from  India  to 
this  country  will  arise  in  this  way;  a  merchant  in  London, 

*See  the  brilliant  book  of  M.  Edmond  Th6ry,  Editor  of 
l'£conomiste  Europeen,  La  Crise  des  Changes,  chapters  10  and  II, 


248  BIME  TA  LLISM. 

who  is  thinking  of  importing  goods  from  the  East,  looks  at  the 
price  current  in  Calcutta,  and  he  sees  the  price  quoted  in 
rupees.  The  merchant  in  London  is  in  possession  of  sovereigns 
in  London,  therefore  he  has  two  operations :  first,  he  has  to 
buy  his  rupees  in  India  ;  next,  with  those  rupees  he  has  to 
buy  the  article  which  he  saw  in  the  price  current.  The  ques- 
tion of  profit  and  loss  to  him  is  compounded  of  the  result  of 
those  two  operations ;  if,  therefore,  he  can  buy  his  rupees  in 
Calcutta  on  more  favorable  terms,  he  will  find  it  to  his  interest 
to  go  into  a  speculation  which  would  not  otherwise  be  profitable. 
If  he  can  get  rupees  at  is.  8d.  instead  of  2s.,  and  he  can  buy 
his  goods  in  Calcutta  with  the  same  number  of  rupees,  that  is 
so  much  extra  gain  to  him.  Conversely,  the  English  exporter 
of  goods  to  the  East  will  receive  payment  in  rupees,  and  he 
will  have  to  sell  those  rupees  ;  and  if  he  sells  them  for  a  less 
amount  of  sovereigns,  he  will  suffer  a  loss,  and  that  is  a  dis- 
couragement to  exporting  from  this  country  to  India."  (No. 
1368.)  At  other  places  in  his  testimony  he  said:  "Those 
countries  [the  East]  are  the  great  majority  of  the  world  ;  the 
circulation  of  silver  in  those  countries  is  something  enormous." 
(No.  1370.)  "Gold  will  buy  a  great  deal  more  silver  than  it 
used  to  do ;  but  the  silver  prices  of  articles  in  Calcutta  have 
not  been  affected  :  silver  is  not,  as  yet,  depreciated  in  the 
East."  (No.  1377.)  "  The  depreciation  of  silver  has  necessarily 
caused  discouragement  of  export  to  the  East."  (No.  1398.) 

The  discouragement  of  exports  from  England  and 
generally  from  Europe  to  the  Orient,  which  has  been 
stated  above,  and  in  part  explained,  was,  from  the 
very  first,  a  subject  of  much  distress  and  anxiety  in 
the  first-named  country,  and  had  much  to  do  with  the 
appointment  of  the  Select  Committee  in  1876.  It 
was,  however,  generally  held  that,  painful  as  were  the 
losses  then  suffered  from  this  cause,  these  must  neces- 
sarily soon  be  at  an  end,  through  the  inevitable 
readjustment  which  was  to  take  place  according  to  the 
philosophy  of  the  rnonometallists.  But  when,  twelve 


REVIEW  AND    SUMMARY.  249 

years  later,  the  Herschell  Commission  had  occasion  to 
report  on  the  same  subject,  they  found  themselves 
obliged  to  state  that  the  effects  of  demonetization  in 
this  direction  still  continued ;  and  that  their  force  had 
not  diminished,  but  increased.  "It  may  safely  be 
said,"  remarked  the  Commissioners  in  their  unani- 
mous report,  "that  there  is  no  evidence  of  a  rise  of 
prices  in  India.  The  purchasing  power  of  the  rupee 
has  not  fallen."  Meanwhile  the  continued  operation 
of  this  cause  over  an  additional  period  of  twelve  years 
had  seriously  affected  English  industry,  and  had 
brought  the  cotton  manufacturers  of  England  to  a  state 
of  dire  distress,  which  speedily  converted  them  to 
bimetallism.  Lancashire  became  one  of  the  chief 
centres  of  agitation  for  the  restoration  of  the  broken 
par-of-exchange.  In  the  report  of  the  Commission  on 
the  Depression  of  Trade,  issued  in  1886,  the  evils  from 
which  English  industry  had  been  suffering  ever  since 
1873,  the  date  which  the  Commission  fixes  for  the 
beginning  of  the  period  of  disturbance  and  disaster, 
are  even  more  fully  and  elaborately  set  forth. 

Since  the  date  of  the  last  testimony  cited  eight  more 
years  of  disaster  have  passed ;  and  still  the  promised 
readjustment  has  not  taken  place.  It  was  not  until 
the  repeal  of  the  Sherman  law  in  the  United  States 
and  the  closing  of  the  East  Indian  mints,  that  silver 
prices  in  the  East  could  be  said  to  have  risen  at  all; 
and,  even  at  the  height  of  that  rise,  now  partly  recov- 
ered from,  it  was  still  true  that  the  value  of  the  rupee 
in  Eastern  commodities  constituted  a  high  premium 
upon  local  production,  with  results  increasingly  dis- 
astrous to  the  gold- using  States.  And  it  is  to  be  said 


2$O  BIMETALLISM. 

that  the  impulse  thus  given  to  Eastern  manufactures 
was  not  in  the  nature  of  protection,  which  secures  only 
the  home  market,  but  was,  the  rather,  in  the  nature  of 
a  bounty  upon  export,  which  must  be  felt  by  all  com- 
petitors. During  the  past  four  or  five  years  the 
reports  of  the  English  consuls  have  been  full  of  most 
unwelcome  information  regarding  the  rise  and  growth 
of  new  branches  of  industry  in  India,  Japan,  and  even 
China.*  The  statistics  of  cotton  factories  established 
in  Japan,  for  example,  show  an  exceedingly  rapid 
growth ;  while  India  has  exhibited  an  increasing  power 
to  produce  for  herself  articles  which  formerly  she  im- 
ported from  Europe.  Not  only  so ;  but,  as  Mr.  Barclay 
stated  in  his  testimony  before  the  Herschell  Commis- 
sion, Indian  manufacturers  are  already  cutting  English 
manufactures  out  of  the  neutral  silver  countries  of  the 
East.  The  lists  of  Japanese  industries  read  almost 
ludicrously  for  us,  though  they  furnish  to  England 
very  serious  matter  for  reflection.  Among  the  articles 
manufactured,  I  note  umbrellas  for  China,  matches, 
sulphuric  acid,  hardware,  lamps,  portmanteaus,  boots, 
hats,  pocket-handkerchiefs,  and  paper.  Japan  is 
shipping  Portland  cement  to  China;  while  her  coal, 
under  the  bounty  afforded  by  the  rate  of  exchange,  is 
enabling  her  to  supply  both  China  and  India,  where 
formerly  British  coal  was  used  in  vast  amounts.  Even 
China  has,  under  the  same  encouragement,  turned 
herself  to  manufacture.  I  note  in  a  recent  report  that 
China  has  already  begun  to  make  her  own  pianos,  in 
the  sense,  that  is,  of  turning  out  and  finishing  all  the 

*See    report  of    Indian    Currency  Commission,  American  re- 
print, pp.  593,  599,  6pQ, 


REVIEW  AND    SUMMARY.  2$  I 

woodwork,  though  still  using  European  tuning-plates, 
keys,  strings,  etc.  China  is  even  manufacturing  Brit- 
ish beer! 

So  conspicuous  have  become  the  effects  of  this  cause 
in  prejudice  of  English  interests,  that  even  in  the 
London  Titties  we  find  the  following  statement  under 
date  of  Nov.  20,  1895: 

"  One  does  not  require  to  believe  in  bimetallism  in  order  to 
recognize  the  enormous  advantages  which  the  manufacturers 
in  a  silver  country  enjoy  in  competing  with  gold  countries. 
The  cost  of  the  necessaries  of  life  has  remained  absolutely 
unaffected  by  the  fall  in  silver ;  and  the  workman  is  therefore 
quite  content  to  receive  the  same  wages  as  formerly.  But  the 
wages  bill  of  the  employer  in  China  or  Japan  has  remained  act- 
ually the  same ;  it  stands,  in  relation  to  that  of  his  Western 
competitor,  at  only  half  the  figure  to  which  it  formerly 
amounted.  .  .  .  The  depreciation  of  silver  might  in  fact 
be  said  to  operate  as  a  system  of  protection  in  favor  of  the 
industries  of  silver  countries  as  against  those  of  gold  countries." 

On  the  same  point  we  have  the  testimony  of  the 
Chairman  of  the  Hong  Kong  and  Shanghai  Banking 
Corporation,  under  date  of  August  18,  1894. 

"  Now  that  we  have  actually  been  working,  for  a  considerable 
time,  on  a  low  level  of  exchange,  we  can  see  plainly,  as  we  have 
anticipated  and  have  not  hesitated  to  predict  would  be  the 
case,  that  its  effect  is  to  stimulate  exports  from  all  silver-using 
countries,  and  grievously  depress  imports  from  all  gold-using 
ones." 

It  will  appear  what  a  serious  matter  the  "break  of 
gauge" — the  dislocation  of  exchange — has  proved  to 
be,  in  its  influence  upon  British  and  all  European  trade 
and  manufacture.  But  a  more  important  considera- 
tion still  remains  to  be  noted.  If  it  be  true,  as  I 
believe  it  is,  that  English  trade,  especially  with  the 


BIME  TA  LLISM. 

Orient  and  with  silver  countries  generally,  has  for  a 
long  time  stood  largely  on  the  basis  of  custom,  tradi- 
tion, and  use,  the  loss  to  England  from  this  cause  will 
not  be  measured  by  what  she  has  had  to  bear  from 
1873  down  to  tb  i  present  time,  or  even  down  to  some 
later  time,  when  the  long-postponed  readjustment 
shall  at  last  take  place.  These  Eastern  countries — and 
I  believe  the  same  is  true  in  a  degree  of  Mexico  and 
many  South  American  states — if  manufactures  are 
once  fairly  established  in  them,  under  the  force  of  the 
tremendous  bounty  which  is  given  by  the  dislocation 
of  exchange,  are  not  going  back  to  English  markets 
when  that  cause  shall  cease  to  operate.  Their  people 
have  hitherto  been  accustomed  to  buy  English  goods, 
largely  because  of  the  organization  of  British  com- 
merce and  the  force  of  tradition,  custom,  and  use. 
British  ships  have  gone  everywhere.  British  factors 
and  agents  have  been  found  in  every  port  or  mart; 
their  barbarous  or  semi-civilized  customers  have  clung 
to  British  trademarks,  British  styles,  and  British 
fashions.  The  hold  of  tradition,  custom,  and  use, 
once  broken,  can  never  be  restored. 

I  have  now  said  practically  all  that  needs  to  be  said 
regarding  this  very  important  branch  of  our  subject; 
but,  as  the  theme  is  a  new  one,  and  as  there  is  always, 
in  such  matters,  room  for  exaggeration  of  statement 
and  exaggeration  of  opinion,  I  think  it  desirable  to 
quote,  at  some  length,  from  a  carefully  reasoned  article 
by  Prof.  Lexis,  of  Germany,  whom  I  have  termed  the 
first  economic  statistician  of  the  world,  in  the  Economic 
Journal  for  December,  1895: 

"  The   expenses   of   production   of   Indian   commodities,  as 


REVIEW  AND    SUMMARY.  253 

expressed  in  silver,  have  not  increased  nearly  in  proportion  to 
the  fall  of  silver  as  measured  in  gold  [p.  537].  The  falling 
value  of  the  rupee  favors  the  competition  of  India  in  Europe. 
Unless  the  export  dealers  speculate,  it  brings  them  no  extra 
Profit ;  but  it  does  enable  them,  when  gold  prices  are  falling  in 
the  general  market,  to  effect  a  sale  at  lower  prices  with  normal 
profits,  (p.  538.)  If  it  is  true  that  wages  and  other  expenses  of 
production  have  not  risen  in  nearly  the  same  proportion  as  the 
rupee  has  depreciated ;  if  the  purchasing  power  of  the  rupee 
in  1892  was,  on  the  whole,  only  little,  or  perhaps  not  at  all,  less 
than  in  1881,  then  those  people  in  India  who  are  interested  in 
the  export  of  wheat  have  been  more  favorably  situated  during 
this  period  than  European  landlords,  not  only  because  of  the 
conditions  of  production  and  transport,  but  also  to  a  certain 
extent  because  of  the  fall  of  the  rupee.  How  the  advantage 
derived  from  this  source  has  been  distributed  between  the  ex- 
port merchants,  the  middleman,  and  the  producers  is  a  matter 
of  indifference ;  in  any  case  the  fall  of  the  exchange  has  acted 
as  a  continuous  stimulant  to  export,  which  would  not,  without 
the  stimulus,  have  been  so  extensive  as  it  actually  has  been,  and 
would  have  come  to  a  standstill  at  a  price  above  that  to  which, 
as  things  were,  it  actually  fell.  (p.  540.)  It  is  not  true  that, 
when  Indian  export  is  favored  by  the  exchanges,  it  will  auto- 
matically produce  an  increase  in  import  also."  (p.  541.) 

[This  advantage,  he  explains,  is  often  only  a  relative  one, 
checking  or  lessening  a  loss  connected  with  the  export,  and 
thus  making  it  possible  to  maintain  for  a  longer  period  com- 
petition with  other  producers  ;  e.g.,  1893  and  1894,  when  India 
received  the  lowest  price  for  corn  in  gold  that  had  been  known 
for  centuries  ;  yet  the  relative  advantage  from  the  fall  of  the 
rupee  was  at  this  time  greater  than  it  had  ever  been.] 

"  Nor  can  we  say  how  long  these  effects  would  continue  if 
the  value  of  silver  were  permanently  fixed  at  somewhere  about 
its  present  height.  Certainly  it  would  take  much  longer  to 
reconcile  the  standards  of  value  of  European  gold  countries 
with  one  of  the  great  Asiatic  empires,  than  for  the  same 
process  to  take  place  with  a  civilized  European  country,  such 
as  Austria,  which  is  completely  involved  in  the  movements  of 


254  BIMETALLISM. 

modern  trade.  Many  writers  seem  instinctively  to  refer  prices 
in  the  great  Asiatic  silver-standard  domain  to  gold  as  the  only 
standard  of  value,  and  not  to  realize  that  these  countries  have 
an  independent  standard  for  themselves  ;  in  India,  indeed,  this 
is  no  longer  silver,  but  the  rupee  with  a  credit  value  above  its 
silver  value.  This  independent  standard  may  certainly  be 
influenced  and  modified  by  the  exchange  of  commodities  with 
the  gold-standard  countries;  but  still  it  is  clear  that  a  precious 
metal  must  have  a  far  more  stable  value  in  a  region  with  a 
population  of  several  hundred  millions,  where  there  is  an  un- 
limited use  for  it  as  money,  than  in  the  Western  world,  where 
it  is  regarded  merely  as  an  ordinary  commodity  for  which  there 
is  little  demand.  Foreign  trade  touches  only  the  surface  of  In- 
dian and  Chinese  national  economy,  and  quantitatively  it  forms 
only  a  very  small  part  of  the  whole  trade  in  these  enormous  States. 
Hence  even  if  the  ratio  between  gold  and  silver  should  be  fixed 
unalterably  at  30 :  i,  it  would  be  probably  be  many  years  before 
the  relative  purchasing  power  of  silver  in  East  Asia  with  respect 
to  labor  and  home  commodities  would  be  completely  in  ac- 
cordance with  European  prices."  (pp.  542,  543.) 


THE   FALL   OF   PRICES. 

But  the  chief  controversy  has  raged  around  the  ques- 
tion as  to  the  fall  of  gold  prices  and  the  appreciation 
of  gold.  These  two  expressions  are  by  the  bimetallists 
treated  as  in  effect  synonymous.  Such  was  the  usage 
of  economists  without  distinction,  before  this  con- 
troversy began.  Jevons  and  all  other  writers  who 
dealt  specially  with  the  subject  of  currency,  when 
they  spoke  of  the  fall  of  gold  prices  meant  an  appre- 
ciation of  gold ;  when  they  spoke  of  the  appreciation 
of  gold,  they  meant  only  a  fall  of  gold  prices.  Some 
monometallists,  however,  especially  from  the  time  of 


REVIEW  AND   SUMMARY.  2$$ 

the  Herschell  Commission,  have  felt  themselves  driven 
to  deny  the  identity  of  these  expressions,  and  to 
denounce  the  use  of  the  word,  appreciation,  except 
in  a  highly  technical  sense.  They  declare  that  it  can 
properly  be  applied  only  to  cases  where  the  fall  of 
gold  prices  results  from  causes  affecting  gold,  and 
not  from  causes  affecting  commodities.  Thus,  they 
would  say  that,  if  gold  had  largely  diminished  in 
quantity,  commodities  remaining  the  same,  there 
would  be  a  real  appreciation  of  gold,  since  here  the 
change  in  prices  would  result  from  a  change  affecting 
gold;  but,  on  the  other  hand,  if  gold  remained  the 
same  and  commodities  largely  increased,  through  the 
discovery  of  new  resources  in  nature  and  of  new  arts  in 
industry,  the  lower  gold  prices  would  not  constitute 
a  real  case  of  the  appreciation  of  gold. 

The  question  is,  after  all,  one  of  the  use  of  words 
only.  My  own  view  inclines  to  regarding  the  term, 
appreciation  of  gold,  as  being  the  same  thing  with  the 
fall  of  general  prices  (i)  because  the  two  terms  have 
been  used  in  this  sense  throughout  a  vast  amount  of 
economic  literature,  by  writers  of  the  highest  reputa- 
tion in  currency  and  finance,  and  that  without 
challenge  or  question  until  the  controversial  necessities 
of  the  monometallists  caused  them  to  insist  upon  the 
distinction.  (2)  Because,  however  just  may  be  the 
distinction  between  two  causes  which  might  operate, 
at  the  same  time,  from  different  directions,  to  produce 
a  fall  of  gold  prices,  it  would  be  impracticable  to  divide 
the  result  accordingly.  No  human  being  could  possi- 
bly know  enough  to  say  how  much  of  such  an  effect 
was  due  to  one  or  to  the  other  of  these  causes.  At 


256  BIMETALLISM. 

the  same  time-  we  should  bear  in  mind,  and  be  free 
to  state  in  argument,  that  an  appreciation  of  gold  may 
sometimes  be  due  to  causes  affecting  the  metal,  some- 
times to  causes  affecting  commodities,  sometimes  to 
both  in  conjunction.  This  I  understand  to  be  the 
view  of  Sir  Robert  Giffen,  who,  in  his  testimony  before 
the  Commission  on  Depression  in  Agriculture,  said: 
"  We  should  confine  ourselves  to  a  strict  use  of  the 
language  and  speak  of  the  appreciation  of  money  as 
merely  the  equivalent  of  a  general  fall  of  prices ;  and 
then  discuss  the  qestion  how  far  and  in  what  sense 
that  can  be  considered  due  to  the  contraction  of 
money." 

Passing  by  this  point,  it  may  be  said  that,  ever  since 
1873,  there  has  been  an  almost  continuous  fall  of  prices 
in  terms  of  gold.  According  to  some  of  the  statistical 
tables  which  have  been  prepared,  there  have  been,  at 
one  or  two  points,  slight  temporary  reactions;  but,  in 
general,  the  movement  has  been  steadily  and  rapidly 
downward.  In  the  effort  to  mark  off  and  measure  the 
steps  of  this  fall  of  prices — this  appreciation  of  gold, 
according  to  the  sense  given  to  that  term — a  consid- 
erable variety  of  so-called  index-numbers  has  been 
employed.  Seven  or  eight  of  these  have  been  intro- 
duced into  the  discussion;  a  few  are  used  far  more 
than  the  others.  The  principal  index-numbers  are 
those  of  the  London  Economist,  Dr.  Soetbeer's,  Mr. 
Sauerbeck's,  and  the  Hamburg  tables.  An  index- 
number  is  constituted  by  taking  the  aggregate  price 
of  a  certain  number  of  articles  (in  definite  quantities), 
in  a  certain  market,  for  a  certain  length  of  time,  as 
the  base  or  standard,  generally  called  100.  The  aggre- 


REVIEW  AND   SUMMARY. 

gate  price  of  the  same  articles,  in  the  same  quantities, 
in  the  same  market,  at  dates  earlier  or  later,  affords 
a  comparison  which  is  supposed  to  determine,  with  a 
reasonable  degree  of  accuracy,  the  appreciation  or 
depreciation  of  the  money  used  in  that  market.  The 
value  of  such  comparisons  will  largely  depend  upon 
the  care  and  good  judgment  with  which  the  articles 
have  been  selected  for  the  index-number,  and  upon 
the  value  assigned  to  each  of  them,  respectively,  that 
is,  the  quantity  of  each  which  is  taken  for  the  pur- 
pose. If,  for  example,  the  price  of  a  pound  of  flour, 
a  pound  of  pepper,  and  a  pound  of  tea  were  to  be 
taken  as  of  equal  importance  for  the  purposes  of  such 
a  table,  a  distinctly  false  result  might  be  produced. 
It  is  necessary  to  have  consideration  of  the  quantities 
of  the  several  articles  which  enter  into  ordinary  con- 
sumption; and  to  "  weight  "  each  article,  with  refer- 
ence to  its  comparative  importance  or  insignificance. 
The  range  and  the  number  of  the  articles  taken  are 
also  matters  of  great  delicacy.  There  must  be  a  due 
representation  of  the  vegetable,  the  animal,  and  the 
mineral  kingdom.  There  must  also  be  a  proper  dis- 
tribution of  commodities  between  raw  materials  and 
finished  products.  The  active  discussion  of  index- 
numbers  during  the  last  ten  years  has  led  to  a  great 
advance  in  the  knowledge  and  appreciation  of  the 
principles  which  should  govern  in  the  construction  of 
such  tables.*  It  may  be  reasonably  presumed  that  the 
first  essays  in  this  direction  were  less  successful  than 

*"  In   1887  the  British  Association   appointed  a  committee  ex- 
pressly to  consider  and  report  on  this   subject.     The  committee 


258  BIMETALLISM. 

the  later  ones,  provided  we  believe  that  no  partisan 
purpose  has  interfered  with  the  singleness  of  aim  of 
those  who  have  constructed  the  later  ones.  At  the 
same  time,  it  is  remarkable  how  closely  the  results 
independently  reached  agree,  in  general,  regarding  the 
course  of  prices,  during  the  last  twenty-five  years. 
"  If,"  says  Dr.  Soetbeer,  "we  compare  the  above 
surveys  with  one  another,  it  must  be  allowed  that 
the  total  index-numbers,  calculated  upon  different 
methods,  do  not  show  any  such  wide  discrepancies  as 
might  have  been  expected.  The  extraordinary  lower- 
ing of  the  level  of  prices  in  the  last  decade  is  shown 
equally  by  them  all." 

As  time  will  not  permit  the  discussion  of  the  several 
index-numbers,  I  take  for  the  general  purpose  that  of 
Mr.  Sauerbeck,  which  is  the  one  published  by  the 
Royal  Statistical  Society,  of  London,  and  which  was 

included  Dr.  Giffen,  Mr.  Inglis-Palgrave,  and  Mr.  J.  B.  Martin, 
as  well  as  five  professors  of  economics  who  had  given  special  at- 
tention to  the  matter.  They  sat  for  three  years  and  presented 
several  reports,  some  of  which  are  highly  technical.  But  anyone 
who  cares  to  inquire  into  details,  and  who  will  read  Dr.  Giffen's 
report  in  1889,  will  find  that  the  committee  substantially  confirm 
the  method  of  construction  adopted  by  careful  statisticians  like 
Mr.  Sauerbeck,  and  that  his  index-number  is  practically  upon 
the  same  lines  as  the  one  the  committee  themselves  recommend." 
(Foxwell  on  Farrer,  p.  646.) 

"  There  have  been  various  index-numbers,  seven  or  eight,  of 
accredited  authority  ;  but  after  a  careful  comparison  of  several 
of  these  numbers  I  have  come  to  the  conclusion  that  Mr.  Sauer- 
beck's is,  upon  the  whole,  the  most  carefully  prepared  and  the 
one  which  best  represents  the  general  movement  of  prices." 
(Royal  Commission  on  Depression  in  Agriculture.  Prof.  H.  S. 
Foxwell,  No.  23,558.) 


REVIEW  AND   SUMMARY. 

made  up  on  lines  laid  down  in  the  report  of  a  Com- 
mittee of  that  society: 

Average  of  the 
Ten  Yearly  Numbers. 

For  the  period  1 869-78 99 

1870-79 97 

1871-80 96 

1872-81 95 

1873-82 93 

1874-83 9° 

1875-84 87 

1876-85 85 

1877-86 82 

1878-87 79 

1879-88 78 

1880-89 76 

1881-90 75 

1882-91 74 

1883-92 72 

1884-93 71 

1885-94 69 

1886-95 68 

Here  we  see  a  steady  downward  movement.     By 
single  years  the  fall  has  been  as  follows : 


1874 102 

i875 96 

1876 95 

i877 94 

1878 87 

1879 83 

1880..  88 


1881 85 

1882 84 

1883 82 

1884 76 

1885 72 

1886 69 

1887 68 


2(X>  •  BIMETALLISM. 


1888 70 

1889 72 

1890 ,.  72 

1891 72 


1892  68 

1893 68 

1894 63 

1895 62 


While  thus  the  prices  of  commodities  in  terms  of 
gold  have  fallen  through  more  than  one-third  of  their 
entire  extent,  silver  has  shown  extraordinary  firmness 
in  relation  to  commodities,  considering  the  great 
changes  at  work  during  the  period.  Compare  the 
gold  prices  of  commodities  with  the  gold  prices  of 
silver,  as  set  forth,  side  by  side,  in  the  following  table 
which  presents  Mr.  Sauerbeck's  figures.  It  will  be 
seen  that,  instead  of  a  marked  depreciation  of  silver 
having  taken  place  since  1873,  that  metal  for  nearly 
twenty  years  held  its  own,  on  the  whole,  rather  better 
than  commodities.  Down  to  1892  prices  in  terms  of 
silver  *  held  up  with  extraordinary  firmness. 

Index-number  of     T    , 
Years.  45  Principal         Index-number 


Commodities. 

01  Oliver. 

1874      

IO2 

95-8 

1875  

96 

93-3 

1876  

95 

86.7 

1877  

94 

90.2 

1878  

87 

86.4 

1879.-  

83 

84.2 

1880  

88 

85.9 

1881  

85 

85.0 

*  "  It  is  quite  evident  that  silver  has  moved  with  the  average 
of  wholesale  commodities  much  more  closely  than  gold  has  done." 
(Sir  R.  Giffen,  Royal  Commission  on  Depression  in  Agriculture, 
No.  18,635.) 


REVIEW  AND    SUMMARY.  26 1 

Index-number  of     T    , 

Years.  45  Principal         Index-number 

of  Sllver' 
84.9 
83.1 
83.3 

79-9 
74.6 
73.3 
70.4 
70.2 
78.4 
74.1 
65.4 
58.6 
47.6 
49. 

Looking  at  the  same  matter  Prof.  Marshall  said  in 
his  testimony  before  the  Herschell  Commission  (Re- 
port of  1888,  No.  9625):  "  As  regards  the  deprecia- 
tion of  silver,  I  am  rather  puzzled  by  the  statement  in 
the  Warrant  appointing  the  Commission,  that  it  is  to 
inquire  into  the  depreciation  of  silver.  /  do  not  admit 
that  silver  has  depreciated,  in  the  sense  of  having  less 
general  purchasing  power.  I  think  that  it  has  appre- 
ciated, and  has  noiv  a  higher  purchasing  power  as  re- 
gards commodities  than  it  had  before." 

Such  is  the  Fall  of  Prices  which  has  aroused  so  much 
feeling,  which  has  been  the  cause  of  so  much  discus- 
sion, which  has  furnished  the  gravamen  of  the  popular 
/  charges   made   against  the  demonetization   of  silver. 
The  bimetallists  have  treated  the  result  as  due,  pri- 


Commodities. 

1882  

84 

1883  

82 

1884  

76 

1885  

72 

1886.  

69 

1887  

68 

1888  

70 

1889  

72 

1890  

72 

1891  

72 

1892  

68 

1893  

.  .:  68 

1894  

63 

1895  

62 

262  BIMETALLISM. 

marily  and  principally,  if  not  almost  wholly,  to  changes 
affecting  the  precious  metals.  They  declare  that  the 
demonetization  of  silver  by  Germany,  and  by  other 
States  following  Germany,  created  an  increased  demand 
for  gold  just  at  the  time  when  gold-production  was 
declining;  and  that  it  is  this  which  has  caused  the  fall 
of  gold  prices.  They  flatly  deny  the  assertion  of  the 
monometallist  writers  that,  on  the  whole,  the  normal 
demand  for  metal  money  is  diminishing  throughout 
the  civilized  world,  owing  to  the  introduction  of  credit 
substitutes  and  the  various  economies  in  the  use  of 
money,  asserting  that,  in  spite  of  these  tendencies, 
the  habits  of  the  peoples  in  regard  to  the  use  and 
carrying  of  money,  the  rapid  developments  of  industry 
and  trade,  and  the  vast  increase  of  travel  are  all  the 
time  making  necessary  a  larger  use  of  metallic  money.* 
Many  monometallists,  on  the  other  hand,  have  under- 
taken to  establish  the  proposition  that  there  has  been 
no  true  appreciation  of  gold ;  that  its  increasing  power 
in  exchange  is  wholly  due  to  the  multiplication  of  com- 
modities and  their  diminishing  cost  of  production. 
This  view  has  been  presented,  as  it  has  been  or,  per- 
haps, could  be  by  no  other  living  man,  by  Mr.  David 
A.  Wells,  whose  facility  and  felicity  of  economic 
illustration  have  given  him  a  reputation  the  world 
over.  Mr.  Wells's  book,  entitled  "Recent  Economic 
Changes,"  comprises  a  marvelously  interesting  and 
impressive  statement  of  instances  of  the  increase  in  the 
power  of  labor  and  capital  during  the  period  imme- 

*  For  the  argument  in  disproof  of  the  monometallist  opinion 
that  credit  devices  are  displacing  money,  see  the  article  of  Prof. 
Willard  Fisher,  Journal  of  Pol.  Econ.  (Chicago),  Sept.  1895. 


REVIEW  AND    SUMMARY.  263 

diately  preceding  the  issue  of  that  work.  Mr.  Wells 
has  a  genius  for  this  sort  of  thing;  and  his  book  em- 
braces a  wide  range  of  illustration.  I  shall  not  attempt 
to  enter  into  an  analysis  of  the  matter  he  presents. 
That  would  require  a  book  by  itself.  I  will  only 
remark,  in  the  most  general  way,  first,  that  such  a 
thesis  as  that  which  Mr.  Wells,  in  common  with  Prof. 
Laughlin  and  Mr.  Atkinson,  has  undertaken  to  de^ 
fend  is,  on  its  very  face,  monstrous  and  absurd.  A 
number  of  nations  have  largely  diminished  (relatively) 
their  use  of  silver;  and  have  largely  increased,  both 
relatively  and  absolutely,  their  use  of  gold.  This 
must  have  had  an  effect  to  lower  prices,  expressed  in 
terms  of  gold.  In  this  connection  Sir  Robert  Giffen 
remarks:  "If  we  were  told  that  copper,  or  iron,  or 
wheat  were  rising  because  there  was  a  deficiency  of 
the  supply  of  them  to  meet  all  the  demands,  we  should 
accept  the  statement  as  a  matter  of  course.  But  what 
is  true  of  copper,  or  iron,  or  wheat  must  equally  be 
true  of  any  commodity  which  happens  to  be  the  stand- 
ard monetary  substance.  If  gold  or  silver  is  that  sub- 
stance, and  gold  or  silver  is  increasingly  in  demand 
without  any  corresponding  increase  in  supply,  then 
people  who  want  gold  and  silver  for  any  purpose 
must  give  more  for  them."  Secondly,  many  of  the 
instances  which  Mr.  Wells  adduces  are  of  such  a  strik- 
ing character  as  to  create  an  altogether  undue  impres- 
sion upon  the  mind  of  the  reader.  Thirdly,  whole 
classes  of  instances  which  he  gives  of  a  greatly  reduced 
cost  of  production  are  such  as  concern  only  the  profits 
of  the  most  favored  producers,  and  are  not  such  as 
affect,  perhaps  in  the  slightest  degree,  the  prices  at 


264  BIME  TA  LLISM. 

which  commodities  are  sold,  which,  as  is  well  known, 
are  determined  by  the  cost  of  production  under  the 
least  fortunate  conditions.  Fourthly,  many  of  the 
most  impressive  examples  which  Mr.  Wells  gives  of 
the  increased  power  of  human  labor  and  capital  are 
drawn  only  from  limited  fields  or  single  countries, 
while  vastly  larger  territories  have  scarcely  felt  the 
slightest  influence  from  such  inventions,  discoveries, 
and  improvements  in  the  arts.  Fifthly,  Mr.  Wells 
overlooks  the  fact  that,  during  the  twenty-  or  twenty- 
five-year  period  immediately  preceding  1873,  during  all 
which  time  prices  were  rising,  enormous  developments 
of  the  same  general  character,  in  increase  of  human 
power  in  production,  took  place.  Those  changes  were 
not  of  the  same  absolute  importance  as  the  changes 
described  by  Mr.  Wells;  but  it  is  fairly  a  question 
whether  they  were  not  of  equal  relative  importance. 

Time  will  not  serve  to  attempt  anything  like  a 
thorough  discussion  of  this  subject,  even  were  a  nice 
determination  possible.  I  believe  that  the  truth  lies 
between  the  two  extremes,  in  this  matter.  I  hold,  with 
the  leading  bimetallist  writers,  (i)  that  a  fall  of  prices 
does  not  necessarily  accompany  a  great  reduction  in 
the  cost  of  production,  as  is  witnessed  by  the  experi- 
ence of  the  world  from  1853  to  1873,  when  enormous 
changes  of  this  character  were  taking  place,  while  yet 
prices  not  only  did  not  fall  but  distinctly  rose.  (2) 
That,  in  spite  of  the  introduction  of  credit  substitutes 
for  money  and  of  various  economies  in  the  use  of 
money,  the  tendency  of  the  age  is  markedly  in  the 
direction  of  a  larger  demand  for  metallic  money ;  and 
that  this  demand,  together  with  the  demand  for  new 


REVIEW  AND   SUMMARY.  26$ 

gold  for  the  currency  of  several  European  nations,  has 
been  very  inadequately  met  by  the  production  of  the 
last  twenty  years.     On  the  other  hand,  I  concede  to 
the  monometallists  that  there  has  been  a  notable  reduc- 
tion in  the  cost  of  producing  very  many  commodities, 
which,  by  itself  alone,  would  tend  to  bring  about  some 
part  of  the  result  under  consideration.     I  do  not  think 
I  could  express  my  own  view  better  than  by  quoting 
the  words  of  Sir  Robert  Giffen,  one  of  the  pillars  of 
gold   monometallism.      He  says:   "Two  causes  only 
have  been  suggested.     One  is  a  greater  multiplication 
of  commodities,  and  diminution  of  the  cost  of  produc- 
tion,   due    to    the    progress    of    invention,   improved 
facilities     of    communication,    lower    freights,    inter- 
national telegraphy,  and  the  like  circumstances.     The 
other  is  that   the   precious   metal  used  for  standard 
money,   namely,  gold,   has  become  relatively  scarcer 
than  it  was,  its  production  being  diminished  on  the 
one  hand,  and  the  demands  for  it  on  the  other  hand 
increased.   .   .   .  /  am  disposed  to  gi-je  greater  weight 
to   the  latter."     Sir    Robert    finds  it  clear   that   the 
depression  of  trade  "  is  largely  due  to  some  permanent 
cause  which  has  lately  begun  to  operate,   to  which 
trade  was  not  subject  for  many  years  after  1850,  and 
which  is  now  in  full  operation,  and  which  has  for  its 
effect  to  prevent  a  rise  of  prices  in  good  years  to  what 
was  long  considered  the  customary  maximum,  and  to 
precipitate  a  fall  in  bad  years  to  a  point  much  below 
the  customary  minimum."    The  same  high  authority, 
perhaps  the  first  commercial  statistician  of  the  world, 
gave  testimony  to  the  same  effect  before  the  Royal 
Commission  on  Depression  in  Agriculture: 


266  BIMETALLISM. 

"  The  fall  of  prices  is  attributable  to  the  contraction  of  gold 
very  largely."  (No.  18,485.)  Ques.  "To  what  do  you  attribute 
the  fall  in  agricultural  prices  ?"  Ans.  "  Chiefly  to  the  same 
causes  that  have  produced  the  fall  in  general  prices."  (No.  18, 
565.)  Ques.  "  What  would  they  be  ?  "  Ans.  "  The  contraction 
of  money  relatively  to  what  went  before.  That  is  the  differ- 
ence between  the  last  twenty  years  and  the  twenty  years  before." 
(No.  18,566.)  Ques.  "  You  still,  I  gather  from  your  evidence 
to-day,  quite  adhere  to  the  opinions  which  you  have  very  em- 
phatically stated  in  this  '  Essay  on  the  Movement  of  Prices  and 
Wages,'  that '  the  recent  change  from  a  high  to  a  low  level  of  prices 
is  due  to  a  change  in  money  of  the  nature  or  in  the  direction 
of  absolute  contraction';  and  again,  '  the  inference  seems  con- 
clusive, therefore,  that  after  1873  the  alteration  in  the  econom- 
ic movement  was  in  money,  and  to  this  must  be  ascribed 
the  change  of  prices  which  has  occurred?'"  Ans.  "I  think 
hat  is  a  fair  statement  of  what  happened  after  1873."  (Not 
18,621.) 

In  the  same  spirit,  the  six  gold  monometallists  of 
the  Herschell  Commission,  in  their  separate  report, 
frankly  admit  that  no  inconsiderable  part  of  the  fall  in 
prices  has  been  due  to  a  proper  appreciation  of  gold, 
though  they  add:  "  We  think  the  sounder  view  is 
that  the  greater  part  of  the  fall  has  resulted  from 
causes  touching  the  commodities  rather  than  from  an 
appreciation  of  the  standard."  Mr.  Goschen,  a  very 
high  authority,  has  repeatedly  given  expression  to 
his  belief  that  the  relative  scarcity  of  gold  is  the 
predominant  cause  of  the  fall  of  prices  which  has  taken 
place  since  the  demonetization  of  silver.  In  the 
debate  in  the  House  of  Commons,  February  28,  1893, 
Mr.  Goschen  said:  "  I  do  not  know  that  the  general 
view  that  the  lowering  of  prices  is  caused  by  the 
appreciation  of  gold  could  seriously  be  questioned." 


REVIEW  AND    SUMMARY.  267 

In  addressing  the  Chamber  of  Commerce  in  Manchester 
in  1885,  Mr.  Goschen  said:  "  The  case  seems  to  me 
to  lie  in  a  nutshell.  You  have  the  decreased  produc- 
tion of  gold ;  you  have  the  increased  production  of 
commodities;  and  you  have  the  fall  in  prices  which 
these  two  factors  ought  to  produce.  It  ought  to  have 
produced  it  and  the  fall  is  there;  but,  somehow  or 
other,  there  are  many  persons  who  are  furiously  angry, 
if  people  contend  that  there  is  any  relation  between 
the  cause  and  the  effect." 

One  of  the  strangest  of  the  many  strange  arguments 
by  which  it  has  been  sought  to  defend  gold  mono- 
metallism in^  these  last  few  years  is  that  which  points 
to  the  enormous  accumulations  of  gold  in  the  treasuries 
and  banks  of  Continental  Europe  as  proof  of  the  abun- 
dance of  the  yellow  metal.  The  facts  that  the  Treasury 
and  Bank  of  Russia  control  over  one  hundred  millions 
sterling  of  gold,  and  that  the  Banks  of  France  and 
Germany  have  more  than  doubled  their  stock  since 
1872,  are  contemplated  by  the  writers  of  this  school 
as  proof  that  the  progress  of  gold  monometallism  has 
served  the  public  welfare,  with  the  single  possible 
exception  that,  if  anything,  gold  may  be  just  a  little 
too  abundant  for  the  best  effect.  In  his  tract  "Has 
Gold  Appreciated?"  Mr.  Charles  C.  Jackson  says: 
"  Judging  by  the  only  safe  indications  we  have, — 
namely,  the  changes  in  the  amount  of  metal  money 
lying  idle  in  the  four  great  banks  of  Europe  at  periods 
of  especially  low  rates  of  interest  and  low  prices  of 
merchandise, — money  has  become  more  and  more 
plenty  as  time  has  gone  on."  The  insertion  of  the 
two  features—  ''especially  low  rates  of  interest  and 


268  BIME  TA  LLISM. 

low  prices  of  merchandise " — gives  the  whole  para- 
graph the  air  of  being  intentionally  funny.  It  would 
have  been  just  as  rational  for  a  citizen  of  Chicago  to 
take  a  visitor  into  the  station-yards  of  that  city 
during  the  railroad  riots  of  1894  and  point  to  the 
enormous  increase  of  engines  and  cars  within  those 
yards  during  the  few  days  preceding,  as  a  proof  of  the 
prosperity,  and  a  measure  of  the  growth,  of  the  trans- 
portation business  of  Chicago.  The  increase  of  the 
cars  and  engines  within  the  yards  was  not  a  healthful 
sign.  They  remained  in  the  yards  because  there  was 
danger  outside.  No  more  are  the  excessive  accumu- 
lations of  gold  in  banks  and  treasuries  *  which  have 
characterized  the  progress  to  gold  monometallism  a 
healthful  sign.  These  ''especially  low  rates  of  in- 
terest and  low  prices  of  merchandise "  explain  the 
accumulation.  The  normal  effect  of  currency-con- 
traction being  to  diminish  the  profits  of  productive 
enterprise  and  to  aggravate  all  ordinary  tendencies 
towards  commercial  and  financial  disorder,f  it  is 
natural  that,  when  this  cause  has  proceeded  a  long 
way,  there  should  be  large  accumulations  of  capital 
lying  idle  in  banks,  at  "especially  low  rates  of  in- 
terest." Cars  and  engines  are  made  to  go  upon  the 
track  and  carry  men  and  merchandise,  though  some 
cars  and  some  engines  must  at  any  given  time  be 


*  Of  course,  in  the  case  of  the  government  Banks  of  Russia, 
Germany,  and  France,  the  accumulations  of  gold  have  largely 
a  political  and  military  significance.  It  is  not  the  actual  wants 
of  commerce,  but  the  possible  exigencies  of  war,  which  are  in 
view  of  those  who  control  the  policy  of  these  institutions. 

f  See  pp.  273-7. 


REVIEW  AND    SUMMARY.  269 

within  the  yards.  Gold  is  mined  and  coined  that  it 
may  run  its  course  as  money,  effecting  the  exchange 
of  commodities,  and  furnishing  the  means  for  an  ex- 
tension of  existing  and  the  opening  of  new  industries, 
though  some  gold  must  at  any  time  be  in  treasuries 
and  banks,  as  a  guaranty  for  immediate  liabilities. 
Any  accumulation  largely  in  excess  of  what  is  usual, 
whether  of  cars  and  engines  in  the  yards  of  railroads,  or 
of  gold  in  the  vaults  of  treasuries  and  banks,  is  rather 
a  subject  of  complaint  than  of  gratulation.  When 
such  an  accumulation  of  gold  is  accompanied  by 
"  especially  low  rates  of  interest  and  low  prices  of 
merchandise,"  there  is  strong  reason  to  suspect  the 
operation  of  causes  injurious  to  industry. 

Whether  we  adopt  the  extreme  view  that  substan- 
tially the  whole  fall  of  prices  has  been  brought  about 
by  the  demonetization  of  silver,  or  the  qualified  view 
of  this  subject  taken  by  Sir  R.  Giffen  and  Mr.  Goschen, 
and  by  the  Royal  Commissioners  of  1885  to  1888,  we 
have  enough  on  which  to  found  the  gravest  charges 
against  that  policy.  The  long-continued  fall  of  prices, 
due  to  changes  in  the  money-supply,  constitutes  one 
of  the  most  distressing  conditions  under  which  trade 
and  production  can  be  carried  on.  As  Mr.  Balfour 
said,  in  his  Mansion  House  speech,  a  slow  apprecia- 
tion of  the  standard  of  value  "  is  probably  the  most 
deadening  and  benumbing  influence  that  can  touch  the 
springs  of  enterprise  in  a  nation."  The  same  senti- 
ment is  expressed  by  the  distinguished  Swiss  econo- 
mist, Prof.  Walras,  of  Lausanne,  who  says  that  a  per- 
manent condition  of  falling  prices  would  give  us  a  per- 
manent state  of  industrial  crisis.  Sir  Robert  Giffen, 


270  BIMETALLISM. 

himself,  has  said:  "  An  appreciation  of  the  money  of 
a  country  forced  on  by  a  government  is  simply  a 
measure  for  disabling  the  productive  powers  of  the 
people  and  making  them  poorer  than  they  otherwise 
would  be." 

As  this  is  a  matter  of  supreme  importance  in  eco- 
nomics, let  us  undertake  a  more  careful  analysis  than 
we  have  yet  had  occasion  to  attempt.  In  connection 
with  the  great  increase  in  the  money-supply,  due  to 
the  discovery  of  South  American  and  Mexican  mines, 
we  inquired  what  were  the  effects  upon  public  pros- 
perity of  a  change  in  the  currency  in  the  direction  of 
inflation.  Let  us  now  inquire  what  is  the  social  and 
industrial  influence  of  a  change  which  is  in  the  nature 
of  contraction.  Here  we  find  a  remarkable  alteration 
in  the  views  of  those  who  especially  affect  economic 
orthodoxy.  One  would  suppose  that,  if  the  money 
function  is  of  such  supreme  importance  as  to  make 
inflation  a  certain  source  of  untold  mischief,  it  could 
hardly  fail  to  be  admitted  that  contraction  might  also 
be  a  possible  source  of  mischief.  But  it  has  not 
pleased  the  economists  of  this  school  to  admit  that 
"  sauce  for  goose  is  sauce  for  gander."  The  very 
writers  who,  during  the  inflation  period  in  the  United 
States,  urged  with  the  greatest  earnestness  the  evils 
of  a  rapid  increase  of  the  money-supply,  teaching  that 
it  disturbed  the  standard  of  value,  altered  the  distri- 
bution of  wealth,  perverted  the  course  of  industry, 
promoted  speculation,  generated  dishonesty,  and  in 
every  conceivable  way  did  mischief  to  the  body  politic 
and  economic,  tell  us  that  the  money  function  is  of 
so  little  consequence,  commercially,  industrially,  and 


REVIEW  AND   SUMMARY.  2J I 

socially,  that  contraction  is  of  no  account  whatsoever. 
They  argue  that  the  production  of  wealth  is  really  a 
matter  only  of  labor-power,  capital-power,  and  land- 
power;  and  that  such  production  may  be  trusted  to 
go  on  without  let  or  hindrance  from  any  such  trivial 
accident  as  contraction  of  the  currency.  I  will  not 
hold  all  the  economists  of  this  school  responsible  for 
so  extreme  a  statement  as  that  which  Mr.  David  A. 
Wells  makes  in  his  Cremation  Plan  of  Resumption  : 
11  Were  all  the  currency  in  the  country  absolutely  swept 
out  of  existence  to-morrow  morning,  there  would 
doubtless  be  much  inconvenience  experienced,  the 
same  as  though  all  the  yard-sticks,  foot-rules,  and 
bushel-measures  were  to  disappear;  but,  in  either 
case,  there  would  not  probably  be  one  less  acre  of  land 
cultivated,  yard  of  cloth  made,  ton  of  coal  dug,  or 
pound  of  iron  smelted,  in  consequence."  Or  for  his 
other  statement,  that  "a  three-cent  piece,  if  it  could 
be  divided  into  a  sufficient  number  of  pieces,  with  each 
piece  capable  of  being  handled,  would  undoubtedly 
suffice  for  doing  all  the  business  of  the  country,  if  no 
other  instrumentality  was  available.'^  But  I  think  it 
not  unfair  to  say  that,  with  somewhat  less  of  extrava- 
gance, they  are  disposed  to  look  upon  the  possible 
evils  of  a  diminishing  money-supply  as  of  small  conse- 
quence. Leaving,  however,  all  question  as  to  the  con- 
sistency of  the  "  orthodox  "  writers,  in  this  respect, 
let  us  inquire  whether  a  diminishing  money-supply 
could  set  in  motion  forces  prejudicial  to  public  pros- 
perity, and,  if  so,  in  what  ways  it  might  be  expected 
that  injurious  results  would  occur. 

In  the  first  place,  a   contraction  of  the  currency, 


2/2  BIMETALLISM. 

either  absolute  or  relative,  that  is,  either  a  positive 
diminution  of  the  money-supply,  or  a  failure  to  keep 
up  with  the  demands  of  commerce,  due  to  enlarged 
productiveness  of  labor  and  capital  and  to  the  multi- 
plication of  the  uses  of  money,  has  the  necessary  and 
immediate  effect  of  enhancing  the  burden  of  all  debts 
and  fixed  charges.  Money  having  been  taken  as  the 
standard  for  determining  the  rights  of  the  creditor  and 
the  obligations  of  the  debtor,  in  all  cases  of  deferred 
payment,  a  diminution  of  the  money-supply,  or  a  fail- 
ure to  keep  up  with  the  demands  of  commerce,  must 
add  to  the  weight  of  the  burdens  imposed  upon  the 
present  by  the  past.  Those  burdens  are,  at  the  best, 
necessarily,  under  the  conditions  of  human  society, 
very  weighty.  Every  man  of  affairs  knows  how  "  the 
interest-charge"  bears  down  upon  productive  enter- 
prise, even  the  most  successful.  Wherever  the  con- 
ditions of  business  cause  enterprise  to  drag  in  the 
least:  in  agriculture,  except  where  natural  resources 
are  richest;  in  commerce,  except  with  the  ablest 
management;  in  manufactures,  except  under  condi- 
tions which  create  a  practical  monopoly,  or  at  least 
give  some  marked  advantage  over  competitors,  the 
weight  of  the  interest-charge  becomes  galling  and 
oppressive.  Few  men  can  till  the  soil,  in  a  long- 
settled  country,  if  they  have  to  borrow  all  their  capital ; 
few  men  can  carry  on  trade  and  manufacture,  except 
under  rare  conditions,  if  they  have  to  borrow  all  their 
capital.  I  appeal  to  every  man  of  business  for  the 
truth  of  this  statement.  The  margin  of  buoyancy  in 
the  human  frame  is  so  slight  that  it  takes  but  very  little 
around  a  man's  neck,  while  he  is  struggling  in  the 


REVIEW  AATD  SUMMARY.  2/3 

water,  to  carry  him  to  the  bottom.  The  margin  of 
profit  in  ordinary  business  is  so  small  that  any  enhance- 
ment of  obligations  derived  from  the  past  must  be 
seriously  felt;  while,  if  that  enhancement  persists 
through  a  considerable  period,  the  drain  upon  produc- 
tive enterprise  cannot  fail  to  tell  heavily  upon  the 
vitality  of  the  commercial  and  industrial  system. 
This  must  be  so  from  the  purely  actuarial  point  of 
view;  but  it  is  fairly  to  be  questioned  whether  the 
moral  influence  of  such  a  cause,  in  inducing  discour- 
agement and  lack  of  confidence,  does  not  operate  with 
even  greater  force. 

But  the  chief  of  the  evil  effects  produced  by  a 
diminishing  money-supply  is,  in  my  opinion,  to  be 
seen  in  the  impairment  of  enterprise  on  the  part  of  the 
producer  and  the  exchanger  of  wealth,  due  to  falling 
prices.  It  must  be  remembered  that,  under  the 
modern  system  of  commerce  and  industry,  the  sole 
motive  for  the  production  of  wealth  is  found  in  the 
anticipated  profits  of  business.  A  manufacturer  buys 
two  hundred  thousand  dollars'  worth  of  material  and 
pays  three  hundred  thousand  dollars  in  wages  because 
he  hopes,  with  good  fortune,  to  realize  perhaps  ten  or 
fifteen  or  twenty  thousand  dollars  in  profits.  Unless 
he  sees  his  way  fairly  open  to  realize  something,  after 
all  his  outlay  and  risk,  his  interest  in  production  ceases, 
except  so  far  as  he  may,  for  a  time,  carry  on  busi- 
ness for  the  sake  of  holding  his  laboring  force  or  his 
circle  of  customers  together.  Yet  a  very  small  reduc- 
tion in  the  price  of  the  large  body  of  goods  produced 
may  entirely  wipe  out  the  utmost  profit  he  could 
reasonably  promise  himself;  may  even  turn  the  antici- 


274  BIMETALLISM. 

pated  profit  into  a  loss.*  In  such  a  case,  even  a 
slight  movement  in  the  direction  of  prices  falling 
between  the  time  when  materials  are  purchased  and 
manufacture  undertaken  and  the  time  when  goods  are 
to  be  marketed  and  paid  for  may,  if  persisted  in,  be- 
come a  very  serious  matter.  There  will  always  be,  in 
all  branches  of  business,  those  whose  financial  strength 
and  power  of  organization  enable  them  to  overcome 
adverse  conditions  and  to  conquer  fortune.  Not 
the  less  is  there,  in  every  branch  of  business,  a  lower 
third,  on  whom  competition  always  presses  with  great 
severity;  to  whom  it  is  a  continual  struggle  to  get 
back  their  outlay ;  who  are  driven  to  their  wits'  ends 
and  to  the  limits  of  their  patience  to  keep  their  place 
in  the  industrial  order.  These  men  are  at  a  disad- 
vantage in  buying,  in  making,  and  in  selling.  Their 
bad  debts  are  numerous;  they  have  to  pay  heavily 
for  discounts;  they  have  perhaps  not  the  means  or  the 
credit  required  to  obtain  the  most  modern  machinery 

*  "  Let  us  suppose,  for  instance,  that  a  man  borrows  ^100,  un- 
der contract  to  pay  back  ^105  at  the  end  of  the  year.  If  mean- 
while the  purchasing  power  of  money  has  risen  10  per  cent  (or, 
which  is  the  same  thing,  general  prices  have  fallen  in  the  ratio  of 
10  to  n),  he  cannot  get  the  ^105  which  he  has  to  pay  back  with- 
out selling  one-tenth  more  commodities  than  would  have  been 
sufficient  for  the  purpose  at  the  beginning  of  the  year.  Assum- 
ing, that  is,  that  the  things  which  he  handles  have  not  changed 
in  value  relatively  to  things  in  general,  he  must  sell  at  the  end  of 
the  year  commodities  which  would  have  cost  him  ^115  los.  at 
the  beginning,  in  order  to  payback  with  interest  his  loan  of  ^100; 
and  therefore  he  has  lost  ground  unless  the  commodities  have  in- 
creased under  his  hands  15^  per  cent.  While  nominally  paying 
5  per  cent  for  the  use  of  his  money,  he  has  really  been  paying 
15^  per  cent."  (Marshall's  Principles  of  Economics,  p.  674.) 


REVIEW  AND   SUMMARY.  2?$ 

and  the  best  appliances.  To  men  in  such  a  situation, 
steadily  falling  prices  are  embarrassing,  harassing,  and 
oppressive:  a  weight  around  their  necks  which  tends 
continually  to  wear  them  out  and  threatens  sooner  or 
later  to  send  them  to  the  bottom.*  Their  margin  is 
so  small,  at  the  best,  that  a  slight  hostile  force  may 
produce  the  most  seriously  injurious  results  to  them ; 
while  the  embarrassments  and  failures  of  this  lower 
third  of  the  producing  class  constitute  a  continual 
menace  to  the  abler  men  of  business  in  their  respective 
branches  of  manufacture,  demoralizing  the  market  for 
goods,  and  unsettling  the  market  for  loans  with  con- 
tinual alarms.  I  have  quoted  an  extended  paragraph  f 
from  the  Report  of  the  British  Commission  on  the 
Depression  of  Trade,  regarding  the  influence  of  falling 
prices  upon  trade  and  production,  through  the  inu 
pairment  or  destruction  of  business  profits.  You  will 
remember  that  the  Commissioners,  who  were  nearly 
unanimous  in  this  view,  discussed  the  subject  in  pre- 
cisely the  same  vein  with  the  remarks  I  have  just 
offered.  They  stated  the  matter  almost  if  not  quite 
as  strongly  as  I  have  done. 

But  there  is  still  a  further  potency  for  mischief  to 
be  found  in  declining  prices.  All  that  has  been  said 
would  be  true  were  there  not  in  modern  business  a 
strongly  marked  tendency  to  occasional  commercial 


*  From  the  first  Annual  Report  of  the  U.  S.  Commissioner  of  La- 
bor (page  67),  and  from  the  recent  statistical  abstracts  published 
by  the  government,  it  appears  that  the  number  of  commercial 
failures  increased  from  4069  in  1872  to  10,907  in  1890  and  to 
15,242  in  1893.  In  1894  it  was  13,895. 

f  Pages  200-1. 


276  BIMETALLISM. 

crises  and  to  "  hard  times"  in  productive  industry. 
It  seems  inseparable  from  the  existing  organization  of 
affairs  that  periods  of  highly  stimulated  production 
should  alternate  with  periods  of  depression  and 
restricted  production.  Under  this  universal  and  seem- 
ingly necessary  condition  of  commerce  and  industry, 
a  general  downward  tendency  of  prices  makes  disturb- 
ances more  frequent,  increases  their  severity  and  pro- 
tracts their  duration.  With  a  moderate,  progressive 
increase  of  the  money-supply  and  a  general  upward 
tendency  of  prices,  men  of  business  will  be  readier  to 
assume  the  initiative;  will  be  more  courageous  and 
hopeful;  will  display  greater  courage  and  energy.  We 
all  know  that  it  is  entirely  possible  that  production 
should  be  locked  in  "a  vicious  circle,"  producers 
closely  limiting  their  operations  because  consumption 
is  checked;  consumption  remaining  all  the  while  at  a 
minimum  for  no  other  reason  than  that  the  operative 
class,  producing  little,  have  little  with  which  to  pur- 
chase goods.  We  have  seen,  in  our  own  lifetime, 
such  a  situation  persisting  through  a  long  period  sim- 
ply because  men  of  business  would  not  believe  in  the 
possibility  of  recovery,  and  each  waited  for  the  other. 
Wherever,  perhaps  by  causes  purely  accidental  in  the 
original  instance,  industry  and  trade  fall  into  this  con- 
dition, the  restoration  of  confidence  and  enterprise 
must  be  tardier  and  more  difficult  when  the  general 
movement  of  prices  is  downwards  than  when  it  is 
upwards.  I  have  just  now  said  that  it  is  a  little  thing 
around  a  man  s  neck  which  will  overcome  his  margin 
of  buoyancy,  slight  at  the  best,  and  drag  him  to  the 
bottom.  It  is  equally  true  that  it  is  a  very  little  thing 


REVIEW  AND    SUMMARY.  277 

under  a  man's  arms  which  will  so  enhance  his  margin 
of  buoyancy  as  to  keep  him  afloat  for  hours. 

SUBSTITUTES   FOR   MONEY. 

But  one  more  remark  requires  to  be  made,  and  that 
is  with  respect  to  the  argument,  so  commonly  employed 
in  these  days  and  already  more  than  once  alluded  to, 
by  which  it  is  attempted  to  be  shown  that  the  volume 
of  actual  money  is  of  little  consequence,  by  reason  of 
the  operation  of  the  credit  system,  which,  it  is  asserted, 
makes  good  any  deficiencies  that  may  exist  in  the  body 
of  the  currency.  On  this  point  I  quote  the  following 
paragraph  from  the  address  of  Mr.  L.  L.  Price,  of 
Oxford  University,  as  President  of  the  Section  of 
Economic  Science  and  Statistics,  at  the  Ipswich  meet- 
ing of  the  British  Association  for  the  Advancement 
of  Science,  last  year.  Mr.  Price  remarks: 

"  It  is  sometimes  asserted  that  the  influence  of  credit  on 
prices  is  so  considerable  as  to  reduce  to  unimportance  a  de- 
crease in  the  available  supplies  of  gold.  It  may  at  once  be  ad- 
mitted that  the  modern  extensive  development  of  credit  obscures 
the  relation  between  the  metal  and  prices  ;  but  it  does  not  destroy 
it;  and,  according  to  the  view  we  have  been  trying  to  em- 
phasize, the  mission  of  economics  is  to  remove  this  veil  of  ob- 
scurity. In  this  instance  it  may  show  that  the  relation  is  not 
unreal  because  it  is  indirect;  that  credit,  expanding  and  con- 
tracting of  itself,  owing  to  increasing  or  diminishing  specula- 
tive activity,  is  yet  limited  and  controlled  in  its  movements  by 
the  changing  dimensions  in  the  basis  of  cash  on  which  it  rests; 
and  that,  through  the  bank  reserves  meeting  or  restricting  the 
demands  for  petty  cash  and  permitting  an  expansion  or  causing 
a  curtailment  of  credit,  the  supplies  of  the  standard  metal* 
exert  an  important  influence  on  prices." 

*  In  his  testimony  before  the  Herschell  Commission  (No. 
9629),  Prof.  Marshall  said  :  "  I  accept  the  common  doctrine  that 


2/8  B IME  TA  LLISM. 

Prof.  Jevons  states  that  credit  gives  a  certain  lati- 
tude, without  rendering  prices  ultimately  independent 
of  the  metallic  basis.  I  quote  also  from  the  remarks 
of  Mr.  Beerneart,  of  Belgium,  at  the  Conference  of 
1892 :  "  The  importance  of  money,  especially  metallic 
money,  cannot  but  grow  greater.  The  mechanism  of 
exchange  is  perfected;  the  use  of  checks  and  other 
instruments  of  credit  is  developed.  They  economize 
the  actual  transfer  of  money,  and  so  diminish  the 
risks,  costs,  and  delays  which  result  from  them ;  but 
they  cannot  supplant  the  precious  metals. ' '  Prof.  Shield 
Nicholson  compares  those  who  adduce  the  fact  that 
trade  is  so  largely  carried  on  by  means  of  paper,  as  a 
proof  that  metallic  money  has  ceased  to  be  of  any 
great  consequence,  without  reflecting  that  the  paper, 
itself,  is  conditioned  upon  the  existence  and  presence 
of  the  metal,  to  an  architect  who  should  declare  that 
it  didn't  in  the  least  matter  of  what  the  foundations 
of  a  building  consisted,  since  all  the  important  parts 
would  be  supported  by  the  first  story.  I  am  con- 
vinced that  what  these  economists  say  regarding  this 
matter  is  strictly  true.  While  the  expansion  of  the 
credit  system  may,  in  a  measure,  disguise  the  influ- 
ence of  a  diminishing  money-supply,  it  cannot,  at  the 
best,  wholly  offset  that  influence;  while  it  is  fairly  a 
question  whether  the  operations  of  credit  are  not  less 
active,  rather  than  more  active,  when  contraction  of 
the  currency  is  going  on  than  when  the  currency  is 
undergoing  a  moderately  progressive  increase. 


prices  generally  rise,  other  things  being  equal,  in  proportion  to 
the  volume  of  the  metals  -which  are  used  as  currency," 


REVIEW  AND    SUMMARY. 


THE   CASE   OF   THE    LABORER. 

How,  meanwhile,  has  the  laborer  fared  ?  The  answer 
to  this  question  will,  by  itself,  cover  far  the  greater 
part  of  the  possible  ill  effects  or  good  effects  of  the 
monetary  policy  adopted  in  1873.  ^  it  can  De  shown 
that,  taking  the  world  at  large,  the  great  mass  of  the 
working  people  have  been  benefited,  while  no  impor- 
tant body  of  them  has  been  injured,  not  one  of  us 
probably  would  be  disposed  to  further  continue  the 
matter.  It  is  true  there  are  other  rights  in  the  world 
than  those  of  the  working  classes,  other  interests  to 
be  conserved.  Landowners  have  their  rights  and 
their  interests,  which  should  be  as  loyally  defended 
against  encroachment  and  proposed  spoliation  as  the 
scanty  wages  of  the  poorest  laborer.  Capitalists  have 
their  rights  and  interests,  which  cannot  be  violated  or 
confiscated,  in  whole  or  in  any  part,  without  social, 
political,  and  industrial  retributions.  But,  after  all 
this  is  said,  it  still  remains  true  that  the  condition  of 
the  working  classes,  if  we  contemplate  a  considerable 
period  of  time,  may  safely  be  taken  as  representative 
of  the  general  condition  of  society. 

In  respect  to  this  point,  the  effects  of  demonetiza- 
tion upon  the  laborer,  there  has  been  exaggeration 
and  passionate  statement  upon  both  sides.  Many 
bimetallists  have  been  wont  to  write  as  if  the  poor 
had  all  the  while  been  growing  poorer,  and  the  labor- 
ing classes  had  been  ground  more  and  more  under 
the  heel  of  monopoly.  On  the  other  hand,  the  mono- 
metallists  have  made  use  of  certain  wage-statistics  as 
conclusive  of  the  whole  matter,  because  these  seem  to 


280  BIMETALLISM. 

show  that  wages  have  actually  advanced  during  the 
period  in  question,  neglecting  several  considerations 
which  are  essential  in  the  full  consideration  of  the 
case.  First,  wage-statistics  never  do  and  never  can  be 
made  fully  and  fairly  representative  of  the  facts  relat- 
ing to  the  condition  of  unorganized  and  unskilled 
labor.  It  is  this  class  which,  were  industrial  injuries 
to  be  suffered  from  such  a  cause  as  we  are  considering, 
would  necessarily  sustain  by  far  the  greater  part  of  the 
pressure  and  the  loss.  It  might  even  happen  that, 
through  a  long  course  of  experiences  prejudicial  to  the 
laboring  classes  as  a  whole,  certain  specially  favored 
and  highly  organized  bodies  of  laborers  might  be 
found  to  have  distinctly  advanced  their  condition. 
Second,  none  of  the  statistical  tables  to  which  the 
monometallists  point  with  so  much  confidence  suffi- 
ciently take  into  account,  if  they  take  into  account  at 
all,  the  loss  of  annual,  as  compared  with  daily,  or 
weekly,  wages  through  irregularity  of  employment.* 
Irregularity  of  employment  is  furnishing  one  of  the 
most  important  industrial  problems  of  the  present  time. 
Irregularity  of  employment  has  increased  greatly  dur- 
ing the"  past  twenty-five  years.  This  is  not  only  a 
matter  of  common  knowledge  and  of  every  intelligent 
man's  observation;  but  it  is  shown  by  an  abundance 
of  statistical  evidence.  Irregularity  of  employment 
would  have  increased  during  the  last  quarter  of  a 
century  whether  demonetization  took  place  or  not; 

*  These  tables  not  only  are  based  upon  the  daily  or  weekly 
wages  of  men  who  may  be  idle  a  large  part  of  the  time,  but  they 
also  and  necessarily  exclude  from  view  those  who  are  perhaps 
habitually  unemployed. 


REVIEW  AND    SUMMARY.  28l 

but  if  the  view  regarding  the  influence  of  that  de- 
monetization which  is  held  by  bimetallists,  and  which 
is  sanctioned  by  nearly  all  intelligent  and  candid  mono- 
metallists,  as  shown  by  the  extracts  taken  from  the 
reports  of  the  Commission  on  the  Depression  of  Trade 
and  of  the  Herschell  Commission,  and  from  the  testi- 
mony or  the  essays  of  economists  like  Prof.  Jevons, 
Mr.  Goschen,  Sir  Robert  Giffen,  and  many  others  be 
correct,  demonetization  must  have  promoted  all  exist- 
ing tendencies  towards  fluctuations  in  production, 
consequent  irregularity  of  employment,  and  resulting 
loss  of  working-time. 

These  are  considerations  the  whole  force  of  which 
goes  to  reduce  the  apparent  extent  of  the  increase  of 
wages  since  1873,  as  shown  by  the  statistics  adduced 
by  monometallist  writers.  There  is,  however,  a  much 
more  telling  reply  to  be  made  to  those  who  assume 
that,  if  they  can  show  that  the  condition  of  the  work- 
ing classes  has  not  been  impaired  during  the  past 
twenty-five  years,  and,  even  more,  if  they  can  show 
that  there  has  been  an  actual  advance  during  this 
period,  they  have  refuted  the  arguments  of  their  op- 
ponents. The  question  is  not  whether  wages  are 
as  high  as  they  were  in  1873.*  It  is,  whether  wages 

*  Mr.  Atkmson  seeks  to  meet  the  bimetallic  demonstration  of 
the  rise  of  gold,  by  the  introduction  of  a  new  test.  He  declares 
that  we  ought  no  longer  to  take  the  prices  of  commodities  as  a 
measure  of  the  appreciation  or  depreciation  of  gold,  but  should 
use  labor  as  that  measure.  Labor,  he  declares,  will  produce  as 
much  gold  now  as  it  did  in  1873.  But  I  venture  to  ask  why,  if 
human  labor  will — thanks  to  improvements  in  the  arts  and  dis- 
coveries in  nature — produce  more  of  the  useful  metals  than  it  did 
in  1873,  it  should  not  also  produce  more  of  the  precious  metals  ? 


282  BIMETALLISM. 

are  as  high  as  they  would  have  been  but  for  the  act  of 
demonetization  and  its  consequences.  The  wages  of 
workingmen  might  be  found  to  be  considerably  larger 
than  they  were  at  the  beginning  of  the  period ;  and 
yet  it  might  be  clear  as  light  that  the  laboring  classes 
had  been  subjected  to  great  injury  and  loss.  The 
working  classes  are  entitled,  not  to  the  wages  they 
received  in  1873,  but  to  the  whole  of  the  wages  which, 
under  the  conditions  of  nature,  of  industry,  and  of 
society,  might  fairly  come  to  them  from  the  employ- 
ing class,  through  the  normal  operation  of  self-interest 
in  production  and  in  trade.  If  any  cause  has  been 
allowed  to  enter  which  could,  by  the  proper  exercise 
of  the  powers  of  government,  have  been  kept  out ;  if 
any  cause  has  been  actually  brought  into  operation  by 
the  neglect  or  mistake  of  government  itself,  to  reduce 
the  fullness  and  completeness  with  which  the  world's 
production  of  wealth  has  been  carried  on,  or  to  reduce 
the  laborer's  share  in  the  resulting  product,  then  the 
working  classes  have  a  grievance,  none  the  less  because 
theirs  is  a  case,  not  of  damnum  emergens,  but  of  lucrum 
cessans. 

This  last  point  is  not  one  of  slight  consequence.  I 
do  not  mention  it  in  a  spirit  of  captiousness  or  of 
cavil.  The  enhancement  of  the  Social  Dividend 
during  the  past  twenty-five  years  should  have  been 
enormous.  The  monometallist  writers  have  com- 


If  mankind  are  to  have  the  benefit  of  cheaper  copper,  iron,  lead, 
zinc,  and  aluminum,  why  is  it  not  to  be  desired  that  mankind 
should  have  the  advantage  of  cheaper  gold  ?  In  other  words, 
why  should  not  the  general  law  of  progress,  invoked  by  M.  Che- 
valier (p.  154),  hold  here  as  well  as  elsewhere? 


REVIEW  AND    SUMMARY.  283 

pletely  given  themselves  away  on  this  point.  In 
attempting  to  show  that  the  fall  of  gold  prices  has  not 
been  due  to  causes  affecting  the  metal,  but  to  the 
greater  mass  of  commodities,  they  have  drawn  pictures 
of  the  increased  productiveness  of  this  age,  through 
improvements  in  the  arts  and  discoveries  of  new 
resources  in  nature,  which,  as  I  said  regarding  Mr. 
Wells's  book,  are  of  the  most  fascinating  and  striking 
character.  Now  for  all  of  this  the  monometallists 
are  bound  to  give  a  full  account,  when  they  come  to 
deal  with  the  facts  of  wages.  If  the  increase  of 
human  production  has  been  as  great,  or  anywhere 
nearly  as  great,  as  they  have  represented  in  their 
argument  against  an  appreciation  of  gold,  then  they 
are  bound  to  show  a  tremendous  advance  of  wages;  or 
else  the  working  classes  have  a  right  to  demand  where 
that  increased  production  has  gone. 

For  myself,  I  have  given  no  small  part  of  my 
strength  during  the  past  twenty  years  to  the  advocacy 
of  that  economic  view  which  makes  the  laborer  the 
residual  claimant  upon  the  product  of  industry.  This 
is  not  the  time  or  the  place  in  which  fully  to  set  forth 
that  view  of  the  distribution  of  wealth.  Suffice  it  to 
say  that  it  rests  upon  three  considerations. 

First,  rent,*  under  the  Ricardian  law,  does  not 
depend  upon  the  activity,  the  intelligence  (above  the 
normal),  or  the  acquisitiveness  of  the  landlord ;  but  is 


*  I  am  speaking  here  only  of  Economic  Rent,  the  remuneration 
paid  for  the  use  of  the  native  properties  of  the  soil  or  for  ad- 
vantages of  location,  not  of  the  rent  of  houses,  or  of  the  returns 
tP  capital  invested  in  productive  improvements  of  land.f 


284  BIMETALLISM. 

fixed  and  determined  by  economic  laws,  independently 
of  the  desires  or  efforts  of  the  recipient. 

Second,  profits  (considering  as  such  only  the  sur- 
plus over  the  amount  which  the  members  of  the 
employing  class,  successful  and  unsuccessful  alike, 
might  fairly  look  to  receive  as  wages  if  employed  by 
others),  profits,  in  this  sense,  being  due  to  superior 
productiveness  on  the  part  of  the  successful  employers, 
come  under  the  same  law  of  distribution  as  the  rent 
of  land.  In  this  view,  profits  no  more  enter  into  that 
cost  of  production  which  determines  prices,  than  does 
economic  rent;  and  are  no  more  obtained  by  deduc- 
tion from  wages  than  is  rent.  So  far  as  both  these 
agents  of  production  are  concerned,  prices  are  deter- 
mined without  respect  to  them.  The  prices  of  agricul- 
tural products  are  fixed  by  the  cost  of  production  on 
lands  that  pay  no  rent,  or  a  rent  so  small  that,  for  all 
purposes  of  economic  reasoning,  it  may  be  disregarded. 
The  prices  of  manufactured  goods  are  determined  by 
the  cost  of  production  on  the  part  of  those  employers 
who,  from  the  limitations  of  their  powers,  achieve  no 
profits,  or,  at  any  rate,  no  profits  above  that  low  mini- 
mum— namely,  the  wages  to  be  earned  by  the  same 
persons  if  employed  by  others — which,  according  to 
this  view  of  the  subject,  are  to  be  regarded  as  no 
profits  at  all. 

Rent  and  business  profits,  thus  partaking  of  the 
nature  of  differential  gains,  neither  enter  into  the  cost 
of  production,  in  the  sense  of  determining  prices  nor 
are  obtained  by  deduction  from  wages.  Rent  and 
profits  thus  being  eliminated,  only  two  elements, 
namely,  wages  and  interest,  enter  irito  cost  of  produc- 


REVIEW  AND    SUMMARY.  285 

tion,  since  these  two  alone  are  represented  in  the  cost 
of  production  of  those  goods  which,  being  produced 
at  the  greatest  disadvantage,  that  is,  upon  the  margin 
of  production,  determine  prices. 

Third,  between  interest  and  wages,  that  is,  between 
the  remuneration  of  the  capitalist  (not  as  employer) 
and  the  remuneration  of  the  laborer,  how  does  the 
issue  shape  itself  ?  I  answer  that  the  course  of 
economic  history  shows,  without  an  important  excep- 
tion and  beyond  the  possibility  of  challenge  or  ques- 
tion, that  the  capitalist  class  are  not  able  to  combine 
and  stand  out  for  a  higher  remuneration,  or  rate  of 
interest,  than  that  which  is  determined  by  the  demand 
for  and  supply  of  capital  under  the  most  primitive 
conditions  of  bargaining.  No  organization  of  capital- 
ists, whether  of  banks  or  of  syndicates  and  trusts,  has 
yet  shown  a  capability  importantly  to  affect  the 
general  rate  of  interest,*  through  any  period  so  long  as 
a  year.  The  impotence  of  capital  in  this  respect  is 
remarkable.  In  the  loan  of  "money,"  as  it  is  called, 
competition,  owing  to  the  eagerness  with  which  the 
opportunities  for  profitable  investment  are  sought 
and  owing  to  the  rapidity  with  which  capital,  after  a 
certain  point  has  been  reached,  tends  to  accumulate, 
still  seems  almost  as  perfect  as  in  the  most  primitive 
stage  of  industrial  society.  Under  these  circum- 
stances, we  have,  assuming  the  activity,  alertness,  and 
intelligence  of  the  working  classes,  their  eager  pursuit 
of  their  own  economic  interests,  and  the  absence  of 

*  I  leave  out  of  account  opportunities  for  the  exploitation  of 
newly-discovered  resources  or  forces  in  nature  by  capitalists  act- 
ing as  entrepreneurs. 


286  BIMETALLISM. 

laws  and  combinations  placing  them  at  an  artificial 
disadvantage  in  competition  for  the  product  of  indus- 
try, what  seems  to  me  the  practically  complete  reali- 
zation of  the  view  I  have  stated.  I  appeal  with 
confidence  to  every  one  who  knows  the  industrial 
history  of  the  last  seventy  years,  whether  the  propor- 
tional share  of  the  product  going  to  rent  and  profits 
has  not  diminished,  under  the  improvements  in  the 
arts  of  production  and  transportation  which  have  taken 
place ;  secondly,  whether  the  rate  of  interest  has  not 
steadily  fallen;  and,  thirdly,  whether  that  share  of 
the  product  which  goes  to  the  laborer  in  wages  has 
not  increased,  on  the  one  hand  at  the  expense  of  rent 
and  profits,  as  differential  gains;  on  the  other  hand 
at  the  expense  of  interest,  as  the  remuneration  of  an 
agent  of  production  which  is  at  a  natural  and  con- 
stantly increasing  disadvantage  in  asserting  its  claims 
upon  the  product  of  industry.  Certainly,  if  the  view 
that  the  laborer  is  the  residual  claimant  upon  the 
product  is  not  founded  upon  sound  economic  consid- 
erations, all  things  have  conspired  during  the  last  two 
generations  to  give  it  the  semblance  of  truth.  The 
whole  course  of  economic  events  has  been  exactly  as 
if  such  a  law  governed  in  the  distribution  of  wealth. 

To  return  to  the  immediate  question  of  the  influ- 
ence of  demonetization  upon  the  condition  of  the 
laboring  class.  Nothing  that  is  charged  by  the  bimetal- 
lists  against  this  measure  would  be  of  a  nature  to  put 
the  working  class  at  any  disadvantage,  special  and 
particular  to  themselves,  in  competing  with  those  who 
represent  other  agents  of  production.  Since  produc- 
tion has  admittedly  increased,  and  increased  largely, 


KEVIEW  AND   SUMMARY.  287 

since  1873,  it  is,  therefore,  a  matter  of  course  that 
wages  have  increased.  When,  however,  we  ask 
whether  wages  have  increased  as  much  as  they  would 
have  done  but  for  demonetization,  we  are  fully  justified 
in  answering  in  the  negative,  for  it  seems  to  me 
indisputable  that  production  has  been  hampered, 
harassed,  and  restricted  in  its  scope  and  energy  by 
the  "  break  of  gauge,"  the  dislocation  of  international 
exchanges,  and  by  the  effects  of  the  appreciation  of 
gold  upon  the  profits  of  the  employer.  It  is  not 
because  demonetization  has  put  the  workingman  at 
a  special  and  particular  disadvantage  in  dealing  with 
his  employer;  but  because  that  employer  has  been 
put  at  so  great  a  disadavantage  in  conducting  his 
operations,  large  or  small,  that  the  laborer  has  neces- 
sarily suffered  with  him.  That  profits,  that  is,  the 
profits  of  active  business,  have  been  impaired  or  made 
precarious  in  a  degree  which  has  hampered  and 
restricted  trade  and  production,  seems  beyond  ques- 
tion. In  this  connection,  I  quote,  as  of  great  signifi- 
cance, a  single  short  paragraph  from  the  report  of  the 
British  Commission  on  the  Depression  of  Trade  and 
Industry.  That  paragraph  has  the  side-note:  "Com- 
plaints of  depression  proceed  chiefly  from  the  produc- 
ing class  "  ;  while  the  paragraph  itself  reads  as  follows: 
"  It  is  from  this  class,  and  more  especially  from  the 
employers  of  labor,  that  the  complaints  chiefly  proceed. 
On  the  other  hand,  those  classes  of  the  population  who 
derive  their  income  from  foreign  investments,  or  from 
property  not  directly  connected  with  productive  in- 
dustries, appear  to  have  little  ground  of  complaint; 
on  the  contrary,  they  have  profited  by  the  remarkably 


288  BIMETALLISM. 

low  prices  of  many  commodities."     (Final    Report, 
xi.) 

The  foregoing  I  believe  to  be  a  fair  and  true  state- 
ment of  the  relations  of  the  laboring  class  to  the  effects 
of  the  demonetization  of  silver.  They  have,  through 
all  this  period,  obtained  as  large  a  share  of  the  product 
of  industry  as  they  had  in  1873.  They  have  obtained 
an  even  larger  share,  through  the  force  of  that  posi- 
tion of  vantage  which  I  have  indicated  as  belonging 
to  them.  Production  has  increased  and  increased 
greatly  since  1873,  by  reason  of  improvements  in  the 
arts  and  the  discovery  of  new  resources  in  nature ;  and 
here,  again,  the  working  classes  have  gained.  But 
production  has  not  increased  as  much  as  it  ought  to 
have  done;  the  cause  of  this  has  been  the  dislocation 
of  international  exchanges  and  undue  impairment  and 
precariousness  of  business  profits;  and  hence  the  work- 
ing classes  have  suffered,  and  have  suffered  greatly, 
from  demonetization. 


THE    END. 


INDEX 


INDEX 


Abraham,  2,  5 

Abrasion  of  coin,  22 

Africa,  South,  gold  fields,  121, 
122,  150,  151 

Alexander  the  Great,  conquest 
of  Persia,  5,  6,  12,  13,  233 

Allard,  M.,  139  n.,  227 

Allison,  Wm.  B.,  227 

Allison  Bill,  see  "  Bland   Bill." 

Alvensleben,  Count,  229 

Amalgamation  process  of  treat- 
ing silver,  3  n.,  46 

America,  production  of  precious 
metals,  45-47;  South  Ameri- 
can revolutions  affect  sup- 
plies, 90;  Appalachian  fields, 
116.  See  California. 

Andrews,  E.  Brown,  227;  also 
preface 

Antwerp,  acquires  commercial 
supremacy,  58 

Appreciation  of  gold,  meaning 
of  term,  254-6 

Arabia,  ratio  between  gold  and 
silver,  53,  54 

Argentina,  how  affected  by  de- 
monetization, 216 

Arts,  the,  consumption  of  pre- 
cious metals  in,  91 

Atkinson,  Edward,  263,  281,  282 

Augustus,  Emperor,  stock  of 
precious  metals  in  his  reign, 
18,  23,  29,  233,  234 

Austen,   Prof.  Roberts,  202 

Australia,  gold  from,  50,  51,  85, 
122,  135,  137,  151,  182  n.,  239; 
how  affected  .by  demonetiza- 
tion, 216 


Austria,  production  of  precious 
metals,  30;  its  monetary  sys- 
tem, 124,  171  n. 

Bacon,  Francis,  4. 

Bagehot,  Walter,  96,  131,  132, 
134,  35. 138,  167, 178,  179, 183, 
199,  202,  203  n.,  240,  247, 
248 

Balfour,  Arthur  James,  201, 
214,  215,  225,  269 

Bamberger,  Herr,  169 

"  Barbarian  "  invasions  of  the 
Roman  Empire,  21,22,  233,  234 

Barbour,  Sir  D.,  201,   204,    246, 

247 

Baring,  Alexander,  89,  108,  209 

Baring,  Sir  Evelyn,  202 

Baring  Failure,  215 

Baxter,  Mr.,  179 

Beaconsfield,  Lord,  84 

Beeneart,  M.,  278 

Belgium,  monetary  system,  2  n., 
124,  131,  132,  192 

Berg,  M.  Van  den,  227,  228 

Bimetallism  passim;  definitions 
of,  I,  2;  absence  of  a  theory 
of  the  subject,  during  early 
efforts  at  maintaining  the  two 
metals  in  circulation  together, 
60;  advantages  of,  137-151 

Birch,  201,  204-6 

"  Bland  Bill,"  186-9 

Boissevain,  M.,  227 

Bosanquet.  Mr.,  39 

Boutwell,  George  S.,  186 

Bowen,  Prof.  Francis,  186 

Bramwell,  Lord,  202 

Brazil,  gold  from,  78 

291 


292 


INDEX. 


Brussels  Co  iference,  see  Con- 
ferences, International. 

Bullion.  Bimetallism  —  Sym- 
metallism,  206-8 

Byzantium,  gold  coinage  of,  32, 

234 
Cairnes,  Prof.  J.  £.,48-51,  59  n., 

82,  96,  134,  178,  240,  243,  244 
California,    gold  from,    50,  51, 

85,   122,  135,  137,   151,  182  n., 

239 
Calonne,  Minister,  86,  114,  126, 

238 
Cambyses,        King,      treasures 

taken  from  Egypt,  n 
Capital  as  a  claimant  upon  the 

product  of  industry,  285,  286 
Cannon,  H.  W.,  227 
Carthaginians,    early    trade  in 

money,  12 
Cave,  Mr.,  179 
Cernuschi,  Henri,  133,  195 
Chaplin,  Henry,  202,  215,  222  n., 

225 
Chevalier,  Michel,   15  n.,  22  n., 

34n.,  35  n.,  90,  96,  108, 109,122, 

123,  125-7,  130,  135, 154, 240 
China,    loss    in    repayment    of 

gold  loan,  215;  how  affected 

by  demonetization,  247,  250, 

251 

Classical  writers,  references  to 
Precious  Metals,  5 

Cliffe  Leslie,  Prof.,  48-50,  243 

Coin,  passim;  corruption  of, 
34-36,  60-61,67-69,  100,  237 

Coinage,  free,  relation  to  bi- 
metallism, i,  2,  86,132  n.,  172- 
5;  gratuitous,  66,  86-88  n. 

Columbus  discovers  America, 
45,  236 

Commissions  and  Inquests, 
monetary;  French  Commis- 
sions, 164-6;  German  Silver 
Commission,  171  n.,232;  Lord 
Iddesleigh's  Commission, 199- 
201,  249,  275,  287,  288  ;  Lord 
Herschell's  Commission,  50, 
51,  127,  135,  142-5,  174  n., 
177,  201-6,  214,  215,  249,  250, 


261;  U.  S.  Silver  Commission, 
J77,  I85,  186;  Commission 
on  Depression  in  Agriculture, 
130,  161,  232,  246,  258  n., 
260  n.,  265,  266;  Select  Com- 
mittee on  the  Depreciation  of 
Silver,  131,  132,  138  n.,  177- 
183,  201,  202  n.,  248. 

Conduitt,  John,  71 

Conferences,  International, 
1867,  155-167,  175;  1878,  72, 
73,  145,  190-194;  1881,  194- 
6,  228;  1889,  198;  1892,  145, 
224-231 

Contraction  of  currency,  influ- 
on  trade  and  production,  30, 

31,  200,  201,  271-7 
Convicts,  as  miners,  19-21 
Cortez,    Conquest    of    Mexico, 

45,  46,  55,  236 

Cost  of  production,  how  re- 
lated to  value,  25-29 

Counterfeiting,  see  Coin,  cor- 
ruption of. 

Courtney,  Leonard  H.,  201,215 

Credit  as  a  substitute  for  money, 
277,  278 

Cremnitz,  mines  of,  30 

Crusades,  their  influence  on  the 
money-supply  of  Europe,  31, 

32,  234 

Currie,  Bertram,  202 

Cyanide  process  of  reducing 
gold,  150,  151 

Daniel,  Book  of,  4 

Debts,  pressure  of,  how  related 
to  contraction  or  expansion 
of  the  currency, 30, 31,  51,  52, 
130,  151-4,  216,  272,  273 

Delbruck,  Herr,  169 

Demand  and  supply,  in  case  of 
precious  metals,  10,  12,  14; 
generally  a  relation  to  cost 
of  production,  25-29 

Demonetization  of  silver,  134, 
150  n., Chapter  VI;  effects  of, 
Chapters  VII  and  VIII,  pas- 
sim 

Denmark,  its  monetary  system, 
170  n.,  179,  184-9,  J95 


INDEX. 


293 


Disraeli,  Benjamin,  see  Beacons- 
field,  Lord. 

Distribution,  geographical,  of 
the  precious  metals,  see  Geo- 
graphical distribution. 

Double  Standard,  inadequacy 
of  the  term  to  represent  bi- 
metallism, 165  n. 

East,  the,  contrasted  with  Eu- 
rope as  to  the  precious  metals, 
31.  32,  591  effects  of  demone- 
tization upon  trade  with,  243- 

254 

Ecbatana,  treasure  of,  5,  8 

Economist,  The  London,  242,  256 

Edgeworth,  Prof.  F.  Y.,  150, 
198,  207,  208 

Employment,  irregularity  of, 
280,  281 

England,  its  monetary  system, 
Chap.  Ill,  p.  91;  166,  190, 
191,  196,  197,  225-7,  230,  232, 
237,  238 

Europe,  contrasted  with  the 
East  as  to  the  use  of  the  pre- 
cious metals,  31,  32,  59 

Evarts,  Wm.  M.,  194 

Exchange,  Par  of,  see  Par  of  Ex- 
change. 

Export  of  precious  metals,  in 
violation  of  law,  32,  34,  37-39 

Failures,  commercial,  aggra- 
vated by  demonetization  of 
silver,  275 

"  Farming"  of  mines,  19,  21 

Farrer,  Lord  (Sir  T.  H.),  77~79, 
'96,  201.  214,  240 

Faucher,  Leon,  123,  124 

Fawcett,  Prof.  H.,  179 

Feer-Herzog,  M.,  192 

Feudalism,  decline  of,  hastened 
by  effects  of  American  silver, 

5i,  52,  153 

Fisher,  Prof.  Irving,  150 
Fisher,   Prof.  Willard,  109,  120, 

128;  also  preface 
Florence,  gold  coinage,  32,  33 
Foxwell,    Prof.   H.  S.,  71.   105, 

106,    156,    198,    199,   208,   209, 

216,  217,  258  n. 


Fractional  money,  34,  62-64 

France,  monetary  system,  2  n., 
35.  63,  75,  Chapters  IV  and 
V,  196,  197,  220,  228,  229,  230, 
238,  239,  241,  267 

Fremantle,  Sir  Charles,  194, 
20 1 

Fullarton,  John,  37 

Gait,  Sir  Alex.,  194 

Gaudin,  Minister,  87,  88 

Geographical  distribution  of  the 
precious  metals  by  the  agency 
of  prices,  11-13,  42,  43 

Germany,  monetary  system  of, 
134, 155, 167-173,  190, 194,  210, 
211,  229,  230,  232,  267 

France's  war  with,  influ- 
ence on  monetary  system  of 
the  world,  167-9,  241 

Gibbs,  Mr.  H.  H.  (Lord  Alden- 
ham),  173,  174,  190,  191,  200, 
202 

Gibson,  Gen.  Randall,  186 

Giffen,  Sir  Robert,  40,  41  n.,  96, 
109,  127,  130, 131,  161,  174, 179, 
195,  202,  203  n.,  214,  216  n.,  240, 
246,  256, 258,  260,  263,  265,  269, 
281 

Gladstone,  216,  226 

Godkin,  E.  L. ,  4 

Gold  and  silver,  passim,  dif- 
ference in  modes  of  occur- 
rence, 2,  3;  as  treasure,  not 
money,  10,  u;  comparative 
production,  45,  46,  56,  57,  78- 
80,  89,  90,  122,  135-7,  139  n., 
180,  181,  204,  205,  239,  240 

Gold  to  silver,  ratio,  5,  33,  53, 
54,  56-60,  65,  75-80,  86-88,  92, 
123.  135-7,  139  "•>  162-4,  170, 
175,  176,  204,  205,  231  n.,  236, 
238,  240 

Gold  and  Silver  Commission, 
see  Commissions  and  Inquests, 
Lord  Herschell's  Commission. 

Goschen,  George  J.,  83,  146, 179, 
190,  225,  266,  267,  269,  281 

Greece,  monetary  system  of,  2  n. 

Greed,  the  enemy  of  true  self- 
interest,  14,  15 


'94 


INDEX. 


Grenfell,  Henry  R. ,  202 

Groesbeck,  W.  S.,  186,  192 

Haggard,  Mr. ,209 

Hallam,  H.,  54 

Hamburg  Tables  of  Prices,  256 

Hamilton,  Alexander,  114,  115, 
219 

Harcourt,  Sir  William,  83,  226 

Harrison,  President,  223 

Harrison,  F.  C.,  246  n. 

Hartz  Mining  District,  29 

Hay,  Sir  Hector,  179,  202 

Hebrew  Scriptures,  reference  to 
precious  metals,  2-5 

Henry  VIII.,  of  England,  cor- 
ruption of  the  coin,  35,  66 

Herschell,  Lord,  135,  201 

Herschell  Commission,  see  Com- 
missions and  Inquests. 

Hertzka,  Theodor,  cited,  2  n. 

Hoffman,  Prof.,  91 

Holland,  its  monetary  system, 
75,  124,  170  n.,  195,  227,  228 

Horton,  S.  Dana,  67,  70-75, 176, 

193,  194 

Houldsworth,Sir  Wm.,  200,  202, 
226 

Howe,  T.  O.,  194 

Hubbard,  Mr.,  179 

Hume,  David,  152-4 

Humboldt,  Alexander  von,  46 

Hungary,  production  of  pre- 
cious metals,  30 

Huskisson,  Wm.,  23,  209 

Hydraulic  mining,  3  n. 

Iddesleigh,  Lord,  200;  the  com- 
mission of  which  he  was 
chairman,  see  Commissions 
and  Inquests 

Idealistic,  the  term  applicable 
to  monometallism,  not  to  bi- 
metallism, 160,  161 

Index  Numbers,  256-260 

India,  appetency  for  silver,  59 
(see  The  East),  179,  180,  246, 

247 

Closing  of  India  Mints  to 

silver,  231;  trade  and  pro- 
duction, how  influenced  by 
Demonetization,  247-254 


Inflation,  metallic,  51,  52,  130, 

I5I-4 

Inglis-Palgrave,  R.  H.,  50,  51, 
200,  202,  258  n. 

Interest  charge,  how  affected  by 
contraction  of  the  currency, 
200,  201,  272,  273;  as  a  share 
of  the  product  of  industry, 
284-6 

International,  contrasted  with 
national,  bimetallism,  i,  2,33, 
34,  64,  65,  99-102 

Italy,  monetary  system,  2  n., 
131,  132,  155,  195;  its  mining 
industry  under  the  Republic, 
18,  19. 

Jackson,  C.  C.,  267-9 

Jacob,  William,  n,  18,  19,  22, 
23,  29,  46,  54 

Japan,  ratio  between  gold  and 
silver,  54  n.;  trade  and  pro- 
duction, how  affected  by  de- 
monetization, 250 

Jevons,  Prof.  W.  S.,  71,  96,  97, 
105,  133,  134,  149,  154,  178, 
199,  203  n  ,  240,  278 

Jews,  the,  54,  55,  236 

Job,  Book  of,  2-4 

John,  King,  of  France,  35,  62 

Joint  Metallism,  2 

Knox,  John  Jay,  112,  113 

Labor,  relation  to  value,  26 

Laborer,  the,  his  relation  to  the 
product  of  industry,  283-6  ; 
how  affected  by  the  demone- 
tization of  silver,  279-88 

Latin  Union,  2,  121,  131,  132, 
135.  174,  176,  180,  185,  192, 
241 

Laughlin,  Prof.  J.  L.,  56,  109- 
iii,  113,  115  n.,  117,  148,  186, 
263 

Laveleye,  Prof.  Emile  de,  I2on., 
125,  192 

Law,  power  to  influence  export 
and  melting  of  precious  met- 
als, 33.  34.  37-39'»  influence  on 
the  ratio  between  the  metals, 
93-98, 133-7,  I83,  204,  205,  238, 
239 


INDEX. 


295 


Lefevre,  J.  Shaw,  244,  245 

Levi,  Montefiore,  145,  146,  228 

Lexis,  Prof.,  96,  161,  240,  247, 
252-4 

Lidderdale,  Mr.,  215 

Liverpool,  Lord,  80,  238 

Locke,  John,  66,  70-76 

Lombards,  the,  55,  236 

Lowndes,  William,  69 

Lubbock,  Sir  John,  201,  204-206 

Macaulay,  Lord,  68-70 

Maclaren,  James,  125 

MacLeod,  H.   D.,  119,  120,  202, 

McCreary,  Mr.,  227 

McCulloch,  J.  R.,  154 

Magnin,  M.,  194 

Mallet,  Sir  Louis,  145,  194,  202, 
204 

Marshall,  Prof.  Alfred,  2,  181, 
182 n., 198,201  n.,2O2,  206-210, 
261,  274  n.,  277,  278  n. 

Martin,  John  Biddulph,  258  n. 

Medina,  discovers  amalgama- 
tion process,  46 

Mees,  M.,  157 

Melting  of  coin,  in  violation  of 
law,  33,  34,  37-39 

Mercantile  theory  regarding 
money,  34,  60,  61,  100 

Mexico,  Conquest  of,  45,  46,  55, 
236 

Mill,  John  Stuart,  28,  37 

Mining  of  precious  metals, 
technicalities,  3;  in  early 
ages,  non-economic,  13,  14; 
special  liabilities  to  injury, 
14-18 

"  Modesty  of  Nature,"  the,  181, 
182 

Money,  its  general  laws,  9,  10, 
25-29 

Montagu,  Sir  Samuel,  202 

Moors  in  Europe,  see  Saracens. 

Napoleon  the  Great,  87,  239 

Napoleon  III.,  155 

National,  contrasted  with  in- 
ternational, bimetallism,  i, 
2.  33.  34.  64.  65,  235 

Nelson,  Henry  L.,  179  n. 

Neo-bimetallists,  99 


!  Nevada,  silver  production  of, 
148,  171,  179 

Newmarch,  William,  129,  130 

Newton,  Sir  Isaac,  66,  70,  71, 
74-77,  85 

Nicholson,  Prof.  J.  Shield,  198, 
202,  238,  278 

Normandie,  M.  de,  196-8,  241 

Norway,  its  monetary  system, 
170  n.,  179,  192,  195 

Nuggets  of  gold,  3,  4  n. 

Orban,  M.  Frere,  192 

Papal  States,  monetary  system 
of,  2  n. 

Paper  money,  French  Revolu- 
tionary, 87,  93;  American 
"Continental,"  93,  94;  Eng- 
lish, during  Restriction,  79, 
80,  113  n. ;  American  passion 
for,  62,  112,  113,  218,  219; 
Italian,  132 

Par  of  Exchange,  between  gold 
countries  and  silver  coun- 
tries, 102-106,  137-147,  220- 

222,   242 

Parieu,  E.  de,  126  n. 
Peitsch,  179 

Persepolis,  treasure  of,  5,  8, 
II,  12 

Persia,  accumulations  of  treas- 
ures, 5,  6,  II,  233 

Peru,  conquest  of,  45~47»  55. 
236 

Phelps,  Anson  Stokes,  Joint 
Metallism,  2 

Philip  of  Macedon,  scarcity  of 
gold,  ii,  12 

Pierson,  N.,  209 

Pixley,  Mr.,  179,  202 

Pizarro,  conquest  of  Peru,  45- 

47,  236 

Placers,  placer-mining,  3  n.,  15 
Playfair,   Lord,    III,    112,    114, 

"7 
Portugal,  its  monetary  system, 

124 

Post,  N.  Y.  Evening,  4,  99 
Potosi,  mines  of,  46,  47,  55,  148 
Precious    metals,    passim,    tt( 

Gold  and  Silver, 


296 


INDEX. 


Price,  L.  L.,  277 

Price,  Prof.  Bonamy,  200 

Prices,  how  affected  by  changes 
in  the  currency,  254,  255 

Prices,  Fall  of,  150,  200.  254-61; 
economic  effects,  see  Contrac- 
tion of  Currency.  Is  the  term 
equivalent  to  appreciation  of 
gold  ?  254-6 

Prices,  Rise  of,  see  Inflation, 
Metallic. 

Production,  current,  as  related 
to  value,  25-29 

Profits,  how  affected  by  cur- 
rency changes,  152-4,  273-7; 
as  a  share  of  the  product  of 
industry,  283-5 

Prussia's  war-chest,  210,  211 

Ptolemy  Philadelphus,  treasure 
of,  6 

Pyramids,  compared  with  an- 
cient accumulations  of  treas- 
ure, 7,  8 

Ratio,  market,  between  gold 
and  silver,  see  Gold  to  Silver, 
Ratio. 

Ratio,  the,  reasons  why  it  is  in- 
expedient to  discuss  the  ratio 
of  a  restored  bimetallism  at 
the  present  time,  211-213 

Readjustment,  economic,  48, 
49,  191,  192,  243-254 

Reay,  Lord,  194 

Recoinage,  in  England,  67,  69, 
70,  237,  238 

Remonetization  of  silver,  ef- 
forts towards,  see  Chapters 
VII  and  VIII;  how  it  may 
be  accomplished,  230,  231 

Rents,  influence  of  changes  in 
the  currency  upon,  244 

Residual  share  of  the  product 
of  industry,  283-5 

Ricardo,  David,  37,  42,  209,  283 

Rogers,  J.  E.  Thorold,  35,  40  n. 

Rome,  its  conquest  of  mining 
countries  and  of  countries 
having  large  accumulations 
of  treasure,  233;  its  wasteful 
mining  administration,  233 


Rothschild,  Baron  Alphonso, 
165,  166,  199;  Alfred  de,  226, 
241 

Rouland,  M.,  Governor  of  Bank 
of  France,  165,  166,  241 

Roumania,  monetary  system 
of,  2  n. 

Russia,  monetary  system  of, 
267 

St.  Hilaire,  Barthelemy,  195 

Salisbury,  Lord,  225,  226 

Saracen  invasion  of  Europe,  ef- 
fect on  production  of  precious 
metals,  29;  gold  coinage,  32, 
234 

Sauerbeck's  Tables,  202,  256, 
258-260 

Say,  Leon,  145,  146,  190,  241 

Schlater  Booth,  Mr.,  200 

Seccombe,  Sir  T.,  190,  191 

Sedgwick,  Prof.  Henry,  134 

Seigniorage,  87,  88  n.,  109,  176 

Serfs,  as  miners,  20,  21 

Seyd,  Ernest,  179,  199 

Shaw,  William  A.,  32,  68,  79,  99, 
107,  128  n.,  146,  147,  169 

"Sherman  Act"  of  1890,  188, 
223,  224,  249 

Sherman,  John,  183,  184 

Siberia,  auriferous  sands  of,  90 

Silver  and  gold,  see  Gold  and 
silver. 

Silver,  Select  Committee  on  the 
Depreciation  of,  see  Commis- 
sions and  Inquests. 

Slaves,  as  miners,  8,  9,  16,  17 

Smith,  Adam,  40  n. 

Smith,  Samuel,  202 

Smuggling, how  far  controllable 
by  law,  37-39 

Soetbeer,  Dr.,  53  n.,  59,  60  n., 
124,  129,  161,  169,  199  n.,  256, 
258 

Solomon,    King,    his    treasure, 

4,  5 

Somerset,  Protector,  corrup- 
tion of  the  coin,  35,  66 

Spain,  production  of  silver,  12, 
29;  discovery  of  America,  45; 
use  of  the  new  silver,  45-48 


INDEX. 


297 


Statistics  of  the  precious  met- 
als, current  production  and 
stock,  202,  203 

—  of  wages,  279-81 

Steuart,  Sir  James,  bfmetallist, 
2,  209 

Stock  of  precious  metals,  202, 
203 

Suess,  Dr.  E.,  83,  182  n. 

Sumner,  Prof.  W.  G.,  113 

Supply  and  demand,  see  De- 
mand and  supply. 

Susa,  treasure  of,  5,  8,  ir 

Sweating  the  coin,  see  Coin, 
corruption  of. 

Sweden,  its  monetary  system, 
170  n.,  179,  192,  195 

Switzerland,  its  monetary  sys- 
tem, 2n.,  131,  132,  156  n.,  192 

Symmetallism,  2,  206-209 

Thurman,  A.  G.,  194 

Times,  The  London,  251 

"  Tinkering  the  currency,"  the 
term  applicable  to  the  mono- 
metallists,  not  to  the  bimet- 
allists,  162 

Tooke,  Newmarch,  129,  130 


Tyrians,  early  trade  in  money, 
12 

Unification  of  coinage,  155-158 

United  States,  monetary  sys- 
tem, I,  63,  110-117,  183-9, 
217-220,  222-4,  238 

Ural  Mountains,  gold-mines. 
15  n.,  90,  122,  240 

Venice,  its  gain  by  the  Cru- 
sades, 32,  234;  commercial 
supremacy  passes  to  Ant- 
werp, 58 

Wages,  how  affected  by  demon- 
etization, 279-88;  as  a  share 
of  the  product  of  industry, 
283-6 

Walker,  F.  A.,  191,  192 

War,  influence  on  mining  indus- 
try, 17,  20  ;  between  France 
and  Germany,  as  influencing 
the  demonetization  of  silver, 
167-9 

War-chest,  210,  211 

Wells,  D.  A.    262-4,  271,  283 

White,  President  A.  D.,  87 

Wilson,  Sir  Rivers,  226,  227 

Wolowski,  Louis,  133,  199 


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ner. (Burlingame.)  12mo.  $2. — Riiig  of  the  Nibelung.  (Dip- 
pold.)  12ino.  $1.50. 

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